World Economic Trends⁶

The return to growth of global industrial production in the summer months of this year is considered by a number of experts to be the first sign that the worldwide recession is coming to an end. But these positive economic trends were primarily brought about by the extensive policies pursued to stabilise the economy. Early economic indicators also suggest a possible turnaround: the composite leading indicator of the Organisation for Economic Co-operation and Development (OECD) for industrialised countries rose to 97.8 in July 2009, its fifth consecutive month-on-month increase. As a result, in its latest interim forecast, the OECD revised its GDP estimate for the G7 countries for 2009 upwards by 0.4 percentage points. It now assumes a decline of 3.7 percent. According to forecasts by Goldman Sachs, mature economies will shrink by 3.2 percent this year and are expected to return to growth of 1.9 percent for 2010. The International Monetary Fund (IMF) expects global GDP to fall by 1.4 percent in 2009. For 2010, the IMF forecasts growth of 2.5 percent. Encouraging signs of possible recovery further increased in both emerging markets and a number of industrialised countries. However, the OECD’s forecast for the US economy for 2009 remains unchanged at a 2.8 percent decline in economic output. By contrast, GDP is expected to shrink by around five percent in Germany (previously by 6.1 percent), 5.6 percent in Japan (previously by 6.8 percent), and 2.1 percent in France (previously by 3.0 percent).

As these forecasts clearly show, it is not yet certain that the global economy has moved into a sustainable and increasingly self-supporting recovery process. There are still considerable risks due to continued strain on the financial markets, unutilised production capacities and deterioration in the labour market situation.

Regional Trends

In the USA, preliminary estimates suggest that the economic downturn has slowed considerably, primarily thanks to the fact that the decline in exports and capital investments has eased and government capital spending is increasing. Early indicators suggest the economy will continue to recover. This turnaround was mainly driven by US industrial firms in an inverse reflection of the trend in late 2008 and early 2009 when industry was particularly badly hit by the collapse of US investment bank Lehman Brothers. The delayed, real economic effects of the financial crisis are now increasingly taking their toll in the labour market. Experts expect US GDP to decline by 2.5 percent in 2009. In the medium term, however, a below-average positive growth trend is still expected. At present, growth of between 2.0 and 2.5 percent is forecast for 2010.

The Chinese economy also grew faster in the summer months of 2009 than in the previous months. The government and central bank successfully countered slumping exports with a comprehensive economic stimulus package and expansive monetary policy. Experts expect growth to reach the target of 8.0 percent in 2009, thanks to the Chinese government’s expansive monetary and fiscal policy. As the impetus from economic policy abates, the economy will lose some of its momentum again in the course of 2010. Nevertheless, experts anticipate average growth in 2010 to surpass 2009 levels, at 8.5 percent. Economic prospects have also improved further in India, according to Goldman Sachs. Capital investments will continue to increase on the back of infrastructure projects. GDP growth is therefore expected to reach 5.8 percent in 2009 and 7.8 percent in 2010. The Brazilian economy also recovered slightly in the last few months. Nevertheless, experts anticipate growth of only 0.2 percent in 2009; in 2010, GDP is expected to increase again by 4.2 percent.

The first signs of stabilisation also appeared in the euro zone. Short-term economic indicators suggest a return to growth in the final quarter of 2009. This positive development is particularly attributable to the French and German economies, which are picking up. Government stimulus packages also played a key stabilising role here. The greatest momentum currently stems from investments in inventory. At the same time, however, declining investments in inventory will slow the upswing in coming quarters. Despite the improvement in prospects, experts forecast a 3.8 percent decrease in GDP for full-year 2009. According to economic experts, growth in the euro zone will slow again in the coming year once investments in inventory have lost momentum. For instance, property prices are likely to fall further appreciably in a number of euro zone countries and there is a risk that this will result in write-downs. As a result, the banks might continue to exercise restraint in lending and, not least, companies and private households will reduce their debt further.

Although order intake in German industry began to rise again in the last few months – partly supported by government programmes, such as the scrapping premium – GDP is expected to fall by 5.0 percent year on year, after growth of 2.8 percent in 2008. For the coming year, 2010, experts anticipate a slowdown in the economy, primarily due to the decline in inventory building at companies.

Trends on the Foreign Exchange Markets

Since early March this year, the dollar has been experiencing a marked period of weakness. The trade-weighted dollar has lost some two thirds of the ground it had previously gained, owing to signs of economic recovery in large industrialised countries and the price rises triggered by this on the stock markets. In view of the fact that economic indicators continue to be positive, downward pressure on the dollar may well continue for some time.

Trends on the Raw Materials Markets

Prices on the raw materials markets tended to move sideways, subject to large fluctuations. Experts still anticipate price corrections for oil and industrial metals, since oversupply is expected to continue on the markets despite the economic recovery in industrialised countries. On top of this, there are increased regulation efforts which make involvement, above all in the oil market, less attractive to financial market participants.

⁶ 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.