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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
14 Management Report – münchener Hypothekenbank eg l annual Report 2011 Overall economic conditions Management report 2011 Economic development The global economy continued to grow in 2011 and expanded by 3.8 percent. The pace of growth was, however, slower than in the previous year due to numerous dramatic events that limited the development of the global economy. Above all else, the increasingly dire sovereign debt crisis in Europe, as well as the consequences of the catastrophic earthquake in Japan, which led to production problems around the world, were the most significant factors. The economy was further dampened by a sharp increase in commodity prices. Economic develop- ment within the eurozone was hit particularly by the effects of the sovereign debt crisis, with the financially weaker coun- tries along the periphery of Europe recording little or even negative economic growth. It was due to these factors that the eurozone’s gross domestic product (GDP) only grew by 1.5 percent. With a 3 percent rate of growth the German economy once again expanded at a substantially stronger pace than the average rate noted for Europe. Despite the difficult environ- ment, the pace of economic development in Germany only slowed towards the end of the year. Growth was primarily driven by strong domestic demand, which accounted for about two-thirds of the total figure. Furthermore, German foreign trade also flourished as exports once again contrib- uted significantly to the growing economy. Investments in residential housing, in particular, benefited from the unchanged uncertainty in the capital markets and rose by almost 6 percent. Investments in for commercial prop- erty and public-sector property construction grew more mod- estly. Expenditures for public-sector construction projects were affected by the expiration of the federal government’s invest- ment programme. Total investments in the construction in- dustry increased by 5.4 percent. Development of consumer prices was primarily influenced by sharply higher prices for energy. The rate of inflation climbed significantly at an average annual rate of 2.3 percent in 2011, although the pace of inflation began to ebb towards the end of the year. The situation in the labour market improved fur- ther. The average number of employed persons for the year set a new record at over 41 million; concurrently, the average number of unemployed fell for the first time in many years to less than 3 million. The average rate of unemployment for the year decreased to 7.1 percent. Financial markets The financial markets in 2011 were again marked by a lack of confidence and trust. This was primarily due to the sovereign debt crisis, especially the increasingly critical situation in the eurozone, which was driven by the rising refinancing prob- lems facing its financially weaker member countries. Above all, this situation was brought into sharp focus by the repeated measures to rescue Greece, as well as by the growing doubts held by market players concerning the creditworthiness and debt consolidation abilities of Italy and the other countries on the periphery of Europe. “The financial markets were dominated by the European sovereign debt crisis.” Multi-faceted efforts by Europe’s political leaders to stabilise the situation in the eurozone were unable to restore the needed level of confidence in the financial markets last year. Instead of building confidence, the 50 percent haircut that European policymakers demanded of investors holding bonds issued by Greece actually solidified investors’ mistrust in the eurozone. This led to yet another EU summit meeting in De- cember where extensive measures were approved to strengthen the currency union and monitor member states’ budgetary discipline even more closely than in the past. Investors, how- ever, took a wait-and-see attitude as they doubted the effec- tiveness of the new rules to limit sovereign deficits in Europe, and also feared the negative consequences that the consoli- dation measures would have on the economy. Investors’ distrustful attitude was clearly visible in the equity markets as the indices became increasingly volatile after get- ting off to relatively good start at the beginning of the year. The DAX index, in particular, turned in a weaker performance, and at the end of 2011 was about 15 percent lower than it was at the beginning of the year.