The European Central Bank published Economic Bulletin research comparing post-pandemic business investment in the euro area and the United States, concluding that euro area investment has grown much less dynamically and that its outlook remains less favourable. On a comparable non-construction basis, business investment increased cumulatively by 6.8% in the euro area between the fourth quarter of 2021 and the fourth quarter of 2024, versus 15.4% in the United States. The analysis attributes much of the gap to intangibles, with euro area growth in intellectual property products (excluding volatile Irish IPP) around half that of the United States, while euro area machinery and equipment investment declined and US machinery and equipment remained slightly positive. Weaker euro area tangible investment is linked to more subdued domestic demand for goods since early 2022, lower capacity utilisation since mid-2023, sharper energy price rises and heightened geopolitical and policy uncertainty, alongside a marked and prolonged fall in confidence. The article also points to an innovation and R&D-related intangible investment differential, with survey evidence indicating that US investment is more often aimed at expanding capacity and innovation, while EU firms more often invest for replacement and report obstacles including skills shortages, high energy costs, uncertainty and onerous regulation; heavier regulation is associated with fewer firm entries and exits and weaker firm growth. On policy support, it contrasts the gradual and delayed deployment of Next Generation EU funds (EUR 750 billion) with the faster rollout of the US Inflation Reduction Act and CHIPS and Science Act (about USD 835 billion), which have boosted US non-residential investment in structures and manufacturing facilities. The research notes recent European Commission initiatives, including the Competitiveness Compass, and highlights measures such as reducing regulatory burdens, removing Single Market barriers, better coordinating EU and national policies, and improving access to finance, including by advancing the capital markets union and venture capital markets.
European Central Bank 2025-03-18
European Central Bank research finds euro area business investment is lagging the United States amid weaker demand and slower intangible spending
The European Central Bank's Economic Bulletin notes that euro area business investment grew by 6.8% compared to 15.4% in the US from Q4 2021 to Q4 2024. This disparity is due to weaker investment in intangibles, machinery, and equipment, along with subdued domestic demand, energy price rises, and regulatory challenges. The report contrasts slower EU fund deployment with rapid US initiatives like the Inflation Reduction Act and highlights European Commission efforts to reduce regulatory burdens and improve access to finance.