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German firms to trim 2010 investments

FRANKFURT, Dec 22 – German manufacturers will invest just a little more next year, the Ifo economic research institute said on Tuesday, a development that could hold back economic recovery.

The companies "are planning only a slight increase of two percent in their investments for the coming year," a statement said following a survey of 1,800 firms in a key sector of the biggest European economy.

Smaller firms in particular were set to scale back investment plans owing to high levels of unused capacity, "one of the main reasons for the weak economic recovery," Ifo said.

For 2009, the economic think-tank\’s survey forecast an investment decline of 22 percent from the level a year earlier, with the strongest declines reported by makers of capital goods, those used to produce finished products.

Automakers were expected to cut investment by one-quarter this year in response to slumping sales.

Ifo found that the most important motive for planned investment this year and next would be to replace current assets, whereas expansion investments were tipped to play a weaker role in 2010.

On Friday however, Ifo\’s key business confidence survey turned in its ninth consecutive increase to the highest level since July 2008, before the collapse of US investment bank Lehman Brothers.

German firms were more upbeat on the current business situation and on their expectations for the future, the institute said last week.

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