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ePaper created 2015-04-21, 16:47:46 | version 1.37.0
münchener Hypothekenbank eg | annual report 201412 management report management Report 2014 Economic Report Overall Economic Conditions Economic Development The global economy grew at very different speeds during 2014. While economic growth in the USA and Great Britain notably im- proved, it lagged behind expectations in most of Europe, Japan, as well as in some emerging countries like China and Brazil. Ac- cording to data provided by the International Monetary Fund (IMF), the pace of growth of the global gross domestic product (GDP) stagnated at 3.3 percent. The tepid expansion of the global economy was primarily due to conflicts in the Ukraine and the Near East, as well as the weaker development of global trade. The eurozone economy again failed to gather momentum in 2014. The European Commission noted that this was mainly due to weaker development posted by numerous major economies – especially France and Italy – as well as the generally difficult situation in the labour market. Following two years of declines in the eurozone’s GDP, marginal growth of 0.8 percent was post- ed in 2014. The German economy was able to record comparatively stable development in the face of this difficult environment. While mild winter weather helped fuel a very strong rise in GDP during the first quarter, development weakened over the next six months. The economy stabilised in the final quarter of 2014 and made it possible for the Federal Statistical Office to report economic growth of 1.6 percent for the entire year. Development was pri- marily driven by private consumption and public sector spend- ing. The pace of new investments in Germany also advanced notably. Investments in construction projects rose by 3.6 percent. Unbroken strong demand for housing led to a 4.1 percent gain in investments for construction of residential housing. Favour- able impulses were also generated by foreign trade, despite less than vibrant global trade. The average rate of inflation for the year was 0.9 percent and no- tably below the previous years’ figures. The low level of inflation was particularly aided by declining energy prices – especially for heating oil and fuel – as the price of crude oil fell by almost half over the course of 2014. The labour market was stable as the average number of employed persons in Germany hit a new record at about 43 million. The number of unemployed fell to about 2.9 million, while the unem- ployment rate declined by 0.2 percentage points to 6.7 percent. Financial Markets Geopolitical tensions coupled with a generally less dynamic glob- al economy also impacted on the financial markets. Development noted for the European stock markets was subdued, while most of the bond markets, in contrast, posted higher prices and lower yields. “The key interest rate in the eurozone fell to a historic low following two interest rate cuts by the ECB.” Lower rates of inflation and weak economic data allowed central banks in industrialised countries to continue their expansive monetary policies. The European Central Bank (ECB) cut its main refinancing rate in June and September by ten basis points each time to currently 0.05 percent, a new historic low. The ECB’s de- posit facility rate was also reduced twice by ten basis points per reduction to minus 0.2 percent, which is the first time that the ECB has set a negative rate. The ECB again provided longer-term liquidity assistance to banks via its targeted longer-term refi- nancing operation (TLTRO) in an effort to encourage banks to make more loans. In addition, the ECB launched a third pro- gramme to buy covered bonds and asset backed securities. In contrast, the US Federal Reserve (Fed) tightened its very loose monetary policy a bit last year as it ended its programme of buy- ing Treasury bonds and mortgage-backed securities in October. The diverging development of economic growth in the USA and the eurozone also influenced exchange rates in the second half of the year. The strong rise in the US dollar exchange rate was fuelled by good economic data as well as by expectations that the Fed would begin to raise interest rates in mid-2015. By the end of the year the euro has declined to 1.21 USD from 1.37 USD noted at the start of the year. The value of the Swiss franc, which