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14 being focused: being better
management report
market report
Development of the Economy as a Whole
The world economy recovered slightly at the beginning of 2002 having apparently overcome
the effects of September 11, 2001, only to fall back to another low point during the summer.
According to the German “Ifo World Economic Climate Index”, by December 2002 economic
activity had almost returned to the same low level of autumn 2001. The threat of war with Iraq,
increasing oil prices and unusually big declines in share prices on international markets all
played a part in weakening the global economy.
In the USA, real GPD grew in 2002 by around 2.5 percent. And while fears of a double
dip in the summer of 2002 proved misplaced, the economy clearly lost impetus again during
the fourth quarter. As in the previous year, private consumption proved the mainstay for
economic demand. However, unemployment rose to an average 5.75 percent, while debt levels
among private households grew considerably. Nevertheless, consumption did increase in the
wake of fiscal policy measures, and even private house construction picked up – a development
not reflected in the commercial construction sector.
Following the low at the end of 2001, the economies in the member states of the European
Monetary Union improved slightly, although production only increased very slowly by
0.8 percent. However, developments forecast in the spring failed to materialize. On average,
the euro gained around 5 percent on the dollar in 2002, moving up by around 13 percent
during the course of the year. On the other hand, the euro weakened against the currencies of
central and eastern Europe. Private consumption was stronger, but demand for capital goods
declined.
After the dip at the end of 2001, the German economy stabilized during 2002, although
no real upturn took hold. According to the “Ifo Institute”, real GDP growth is expected to
reach no more than around 0.2 percent, even though the starting point in 2001 was very low.
Weak domestic demand, down by around 1.3 percent on the yearly average, is the main cause
for the current poor economic performance. Capital expenditure in the construction sector
fell back by 5.7 percent in 2001. In view of the fall in real income due to lower levels of
employment and slightly increased savings rates, consumer demand – the driving force for the
manufacturing sector – declined by 0.5 percent in 2002.