Europe: Intellectual Property Investment Gains Presence

■ In the Eurozone, domestic demand, including consumption and investment, is supporting the recent resilience of the economy. 

■ Even with sluggish manufacturing activity, investment in intellectual property products continues its upward trend. 
 
The Eurozone has maintained positive growth for eight consecutive quarters up to the July-September quarter, and has not experienced negative growth since the July-September quarter of 2020 (when the economy began to recover after the pandemic).*1 According to the European Commission's "Economic Forecasts for Autumn 2025" released on the 17th and the European Central Bank's (ECB) September staff macroeconomic forecasts, the Eurozone will maintain a growth rate of just over 1% until 2027. Although this is low growth in the medium term, the economy is expected to continue to expand moderately. One of the key factors contributing to the recent resilience of the Eurozone economy is the role of domestic demand, which includes both consumption and investment. On the consumption side, the price surge driven by the energy crisis has ended, and the key factor behind the improvement in household real income is wage increases. However, economic statistics related to investment in the Eurozone are somewhat limited, making it difficult to understand why investment has remained strong despite ongoing sluggishness in manufacturing production. This article examines the current investment situation in the Eurozone by starting with the internal composition of fixed capital formation, an investment item in GDP statistics. 

 
Both the "Autumn 2025 Economic Forecasts" and the ECB staff's macroeconomic forecasts predict that in the first nine months of 2025, fixed capital formation under the GDP demand item will grow faster than previously expected. One reason is the strong growth in investment in intellectual property products, which is expected to rebound in 2026, leading to a slowdown in the growth of fixed capital formation. Looking at the composition of fixed capital formation, since 2021, housing (residential investment) has declined, but non-residential buildings, machinery and equipment, and intellectual property products have all grown faster than the overall fixed capital formation. Among these, intellectual property products have seen the highest growth rate, showing a continuous upward trend since the latter half of the 2010s, albeit with short-term fluctuations. Investment in intellectual property products largely comes from multinational corporations' European bases established in Ireland, a tax haven, and its quarterly volatility is particularly significant compared to other investment items. Intellectual property products include research and development, mineral exploration and evaluation, computer software and databases, and entertainment, literature, and artistic works, with research and development and software investment being the main drivers. When we examine the information and communication technology (ICT) equipment included in machinery and equipment, along with data centers and logistics facilities, which fall under non-residential building investments, we see that the share of high-tech investments in fixed capital formation is on the rise. This trend is anticipated to accelerate in the coming years, largely fueled by the boom in artificial intelligence (AI). High-tech-related investments differ from traditional investments, such as existing equipment upgrades, and are expected to mitigate the downward pressure on the economy caused by the equipment investment cycle; however, on the other hand, investments in intellectual property products are more volatile and may amplify economic fluctuations in the short term, a point that also needs to be noted.