1. Economic environment
The global economy was shaken by several events at the beginning of the year. They included the sharp rise in the price of oil due to the unrest in the Arab countries, the earthquake in Japan, and the worsening of the debt crisis in the Euro region. While the impact of the first two events was largely overcome by mid-year, the debt crisis in the Euro region continued to create uncertainty for the rest of the year (Source: German Council of Economic Experts, November 2011).
This uncertainty, combined with the discussion about raising the debt ceiling in the United States, led to severe turbulence in the international financial markets in late July and early August. Downgraded ratings of countries and banks in the Euro region further aggravated the situation. The European Central Bank (ECB) repeatedly took action to reduce spreads and funding costs of the Euro countries affected. The worsening debt situation resulted in many economic indicators deteriorating significantly.
Overall, the global economy grew by approximately 3.8 % in 2011 (Source IMF, January 2012). Industrialized countries generated only weak economic growth. In addition, almost all industrialized countries were faced with having to significantly cut their budgets to reduce debt, which has significantly increased the risk of a recession.
The continuing robust economic development of the emerging countries, on the other hand, had [--break--] a stabilizing effect on the global economy, although growth in these countries also slowed considerably. Among the reasons are a sharp decline in exports, reduced domestic economic momentum due to the end of economic incentive programs, and a tighter monetary policy.
The economy in the Euro region has weakened considerably during the year. The European economy grew by 1.6 % in 2011. The natural disaster in Japan and higher energy prices in the second quarter and the escalating debt crisis in the third quarter put a damper on the economy, [--break--] although economic development again varied widely among the various member states. As in the prior year, export-oriented countries (Germany, Finland, the Netherlands, Austria) experienced above-average growth in production. Particularly in the countries on the European periphery (Greece, Portugal, Spain, Ireland), fiscal consolidation efforts added further momentum to the recessionary trend.
During the first half of the year, the German economy experienced a recovery process that [--break--] offset the losses caused by the recession in 2009. However, this momentum faltered as the [--break--] economic environment cooled off towards year end. An initial assessment issued by the [--break--] German Federal Statistical Office puts the growth rate of the gross domestic product at 3 % [--break--] for 2011.
In the U.S., the economic recovery regained momentum during the second half of the year, [--break--] following an economic slowdown in early 2011. In the opinion of leading economic research institutions, this recovery appears to have warded off the danger of another recession for the time being. Gross domestic product grew by 1.8 % over the prior year in 2011.
The Japanese economy was disrupted by the earthquake and tsunami disaster in March 2011. [--break--] It must be assumed that the one-time economic impact of reconstruction measures will not fully offset the adverse effect of the earthquake on gross domestic product by the end of 2011.
The developing countries in Asia, particularly China and India with economic growth rates of 9.2 % and 7.4 %, respectively, experienced the strongest economic expansion worldwide [--break--] in 2011. Investment was the most important driver in China, while economic growth in India was primarily driven by private consumption.
1.1 Automotive division – development of global automobile production
The worldwide automotive market performed well in 2011. With a total of 74.8 million passenger cars and light commercial vehicles, production grew by 3.1 % from the high level of 2010 (Source: IHS Automotive, January 2012).
The 6.4 % increase in production of passenger cars and light commercial vehicles in Germany exceeded the 2.7 % growth rate experienced by Western Europe as whole. While the turmoil [--break--] in the financial markets and the high commodity prices did have a considerable impact, the [--break--] German automotive sector was able to more than offset that impact during the reporting period. 2011 production levels in some European countries, particularly in Italy and Spain, fell behind those of prior years.
Production in North America increased by 9.0 % to 13.1 million passenger cars and light commercial vehicles.
The Japanese automobile production slumped by 13.7 % as a result of the natural and nuclear disaster in March 2011. Automobile production in China grew by 2.5 %. India and South Korea experienced growth rates of 9.8 % and 8.5%, respectively. At 23 %, China’s share of global production was nearly unchanged from the high prior year level.
1.2 Industrial division – development of global engineering and plant construction
According to the German Engineering Association (“Verband deutscher Maschinen- und Anlagenbau” (VDMA)), engineering sales worldwide grew by a very encouraging 13 % (following 17 % in the prior year) in 2011.
The engineering and plant construction sector in EU countries grew by approximately 8 % according to the VDMA, the main driver being capital expenditures on plant and machinery. [--break--] The contributions made by the various countries differed widely. Germany with its growth [--break--] rate of 14 % experienced a very positive trend. Investment activity in France and Sweden was also above average. Investment in Greece and Portugal decreased, as it did in Denmark and [--break--] the United Kingdom.
A positive surprise amidst the overall sluggish economic environment was the engineering sector in the U.S., which also benefitted from high capital expenditures on plant and machinery, growing by 12 %.
Following the disasters in March, the Japanese manufacturing industry placed extensive orders for new machines, machine tools in particular. The engineering sector there grew by a total of around 10 %.
China remained by far the most important market worldwide for foreign machinery manufacturers. According to the VDMA, China’s engineering imports have grown by 20 % to over [--break--] EUR 100 billion in 2011. Machine tools, paper and textile machines were particularly in demand.