In 2012, the global economy1 showed only moderate growth. Gross domestic product grew by about 2 percent around the world. Mature markets exceeded the prior year’s level only slightly, by around 1 percent, while emerging markets achieved an increase of approximately 4 percent. This trend continues to be driven by the financial crisis in Europe, with a particularly negative general economic environment in Southern European countries, the debt crisis in the USA and the weakening of growth in Asian emerging markets.
Over the course of the year under review, global economic growth slowed. Economic output declined, particularly in the second half of the year, in the face of the continuing financial and debt crises in Europe and the USA, and the slowdown in growth momentum in Asia.
With an increase of around 3 percent, industrial production expanded only slightly more than private consumption, which rose by approximately 2.5 percent. While the export-dependent industries in particular posted moderate increases, growth in consumer-related sectors was significantly subdued.
Over the year as a whole, both the North American and Japanese economies posted moderate growth of around 2 percent. In Western Europe, economic growth declined slightly due to recessionary trends seen particularly in some Southern European countries, whereas Germany’s economy managed to grow by around 1 percent, driven by exports and low unemployment. The emerging regions of Asia (excluding Japan), Latin America and Africa/Middle East registered comparatively robust economic growth. Asia (excluding Japan) boosted its economic output by around 5 percent, as before driven mainly by China and India. Latin America registered growth of around 3 percent, and Africa/Middle East of around 4 percent. By contrast, economic growth slowed to approximately 2 percent in Eastern Europe, primarily as a result of declining demand from Western Europe.
Raw material prices increased moderately in 2012 on a year-on-year basis. In the first six months they were influenced by strong fluctuations in input material prices, which stabilized at a high level in the second half of the year. The situation differed both by region and type of input material. Prices for palm kernel oil and butadiene dropped, for example, whereas ethylene prices rose in Europe and Asia, and prices for caustic soda rose around the world. The average price of crude oil was on a par with the prior year.
The euro devalued substantially versus the US dollar on average during the year. However, the development was volatile throughout the year: at the beginning of the year the euro rose steadily, occasionally reaching 1.35 US dollars in the first quarter. Around the middle of the year, the euro drifted steadily lower to 1.20 US dollars before climbing back to 1.32 US dollars toward the end of the year. This development was mainly driven by the debt crisis in Europe.
Changes in the exchange rates of other currencies important to Henkel are indicated in the following table:
Global inflation was around 3 percent. While the overall rate of inflation decreased in both mature markets and emerging markets, the changes differed by region and country. Inflation declined in North America and Western Europe – including Germany. Inflation also declined in Eastern Europe and Asia – and especially in China. By contrast, inflation rose substantially in Latin America and Africa/Middle East.
Global unemployment was on a par with the prior year at 7.5 percent. The unemployment rate in mature markets remained unchanged year on year at around 8 percent, and was also stable, at approximately 7 percent, in emerging markets. The development however differed considerably between regions. Unemployment in North America dropped from around 9 to 8 percent, whereas it increased noticeably in Western Europe in the wake of the debt crisis. Germany’s unemployment rate declined slightly to 6.5 percent. Unemployment fell in Eastern Europe, was slightly above the prior year in Asia, and remained stable year on year in Latin America.
Growth in private consumer spending remained moderate at approximately 2.5 percent. Consumer spending in mature markets actually only increased by around 1 percent year on year in the year under review. Consumers in North America increased their spending by around 2 percent. The debt crisis pushed consumer spending down slightly in Western Europe, while Germany experienced an increase of around 1 percent. The emerging markets exhibited a higher propensity to consume with an increase of around 5 percent.
Industrial production expanded at a moderate rate of around 3 percent in 2012, which was again slightly faster than the economy as a whole. Growth continued to be driven by export-dependent sectors, especially the transport sector. Other export-dependent sectors, such as electronics and metal processing, showed moderate increases in production.
The change in industrial production differed from one region to the next. The manufacturing sector in North America repeated its prior year’s expansion of around 4 percent, while all other regions posted growth rates that fell considerably below the prior year. The debt crisis even caused negative industrial growth in Western Europe. Industrial production declined in Latin America, and particularly in Brazil.
Our important customer sectors, the transport and electronics industries, saw production expand by around 6 percent and 3 percent, respectively. Within the electronics industry, the growth relevant to us in basic products such as electrical systems and semiconductor units was slightly higher than the prior year. The metal industry underwent significantly less growth compared to 2011, expanding by around 3 percent. Expansion in consumer related sectors, such as the global packaging industry, was extremely sluggish. These sectors had only marginal growth along with food products, beverages, paper and printing. Production in the construction industry increased moderately, by around 2 percent in 2012. Construction activity was extremely brisk in North America and the emerging regions, except for Eastern Europe, but declined in Western and Eastern Europe by around 6 and 2 percent, respectively.
Source of global economic data: Feri EuroRating Services, January 2013.