World Economic Trends¹

Global economic growth slowed sharply in 2008 and 2009. The crisis on the international financial markets began with the collapse of the US subprime mortgage market already in 2007. In 2008, the financial crisis went from bad to worse and became a global economic crisis. For a long time, the turmoil was limited to a liquidity crunch on the interbank markets, but the situation deteriorated following the insolvency of several large financial institutions. In order to prevent the global financial system from collapsing, governments in almost all industrialised nations and emerging countries intervened heavily in the economy by launching massive rescue packages. Nevertheless, the financial market turmoil had a major impact worldwide.

While credit conditions for both businesses and private households deteriorated significantly, asset losses and gloomy earnings prospects added to the strains on the economy. Already in the first quarter of financial year 2008/2009 (October to December 2008), the World Economic Climate Index produced by the Ifo World Economic Survey fell to its lowest level for more than 20 years. In the following quarter from January to March 2009, it sank to a record low as a result of increasingly gloomy economic prospects. The downturn in the global economic climate affected not only the large economic regions of North America, Western Europe and Asia, but also Central and Eastern Europe as well as Latin America. Countries such as the USA and the UK mainly suffered from the real estate and financial crisis, while the export-driven economies of Japan, China and Germany were primarily hit by the slump in foreign demand.

It was not until the end of the Demag Cranes Group’s financial year – the summer months of 2009 – that the global economic decline began to slow and signs of stabilisation increased. In the USA, the running down of stock by companies abated and the domestic automotive industry saw a revival. The OECD composite leading indicator, which reflects the assessment of economic activity in industrialised countries, rose to 95.7 in June 2009, its fourth increase in a row. This was due not least to the extensive economic policies pursued to support and reinvigorate the economy. Despite initial signs of stabilisation, the economic downturn is not over yet: for a forecast of economic trends, please see the Forecast Report section of this report.

Economic Trends in the Euro Zone

The euro zone economy also suffered substantially from the crisis: almost all businesses felt the effects of the downturn keenly, especially after the collapse of investment bank Lehman Brothers in September 2008. As a result, there was a sharp decline in capital expenditure in the euro zone and exports slumped. The banks significantly tightened their lending criteria and a number of European countries, such as Spain and the UK, saw sharp drops in property prices. On top of all this, global demand declined, weakening the euro zone economy still further.

The German economy likewise suffered increasingly under the crisis: the low Ifo Business Climate Index at the end of 2008 and throughout the first quarter of 2009 reflected developments such as plummeting new orders and the introduction of shorter working hours. Industry was affected first and foremost by persistently feeble capital spending. The fall in global demand particularly weakened German export business. The economic situation of the already struggling German mechanical engineering companies deteriorated further, particularly over the course of the year. According to the industry association VDMA, order intake in the period from January to September 2009 fell by 44 percent in real terms compared with the same period in the previous year. Towards the summer, the first signs of improvement appeared in the euro zone: business sentiment indicators such as the purchasing managers’ index for manufacturing and the service sector or the Economic Sentiment Indicator published by the EU Commission rose again. The figures for the manufacturing industry suggest a slight recovery. The main impetus for stabilisation came from industry, notably the automotive sector, which benefited in Germany and abroad from economic support packages.

Trends on the Foreign Exchange Markets

On the foreign exchange markets, the US dollar gained considerable ground against the euro at the end of 2008, achieving its peak for the year of USD 1.23 to the euro at the end of October 2008. The US dollar benefited from hugely heightened risk aversion on the international markets. Ever increasing uncertainty drove more and more investors into low-risk investments, including in particular US treasury bonds. Since early 2009, there has been pronounced downward pressure on the value of the dollar against the euro again. The dollar recorded its low for the year so far at USD 1.48 to the euro on 22 September 2009. The average exchange rate for the reporting period from 1 October 2008 to 30 September 2009 was USD 1.35 to the euro.

Trends on the Raw Materials Markets

After rising rapidly until July 2008, the price of crude oil per barrel fell sharply in the period to March 2009, dipping as low as USD 45 per barrel. This decrease was primarily driven by the financial crisis and the associated fall in global demand for crude oil. At the end of the financial year, the oil price began to rise again. According to the Oxford Economics metal price index, metal prices fell sharply by 25 to 30 percentage points per quarter in the last financial year. This trend was primarily driven by declining iron ore, aluminium and zinc prices.

¹ Sources: Commerzbank, Economic Research, “Konjunktur und Finanzmärkte, September/October 2009";
Goldman Sachs, "Global Economics Analyst, September/October 2009";
German Federal Ministry of Economics and Technology, Schlaglichter der Wirtschaftspolitik monthly report, September 2009.