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In the first half of 2011, the global economy fell slightly compared to the expectations
due to a variety of factors, such as the rise in commodities prices early in the
year and the impact of the earthquake in Japan on global manufacturing activity,
particularly on the electronics and automotive industries. Growth remained robust
in emerging economies, while advanced economies registered more moderate performances,
primarily due to the negative impact of the above-mentioned increase in the commodities
prices and the effects of restrictive fiscal policies on domestic demand.
Geographical areas
In the European Union, the recovery was modest in extent (estimated GDP growth of 2.5%), with a range
of performances: Germany reported strong economic growth, while the growth rate
remained essentially static in Spain and Italy. In Greece, the enormous public
debt made it necessitated both a series of measures to contain the public deficit
and a request for aid from the European Union and International Monetary Fund.
In July the two international organisations completed a financial aid package
for Greece aimed at preventing the country’s default and protecting the Euro Area
from a potential contagion effect. Portugal and Ireland, characterized by low
economic growth accompanied by rising public deficits, also requested financial
assistance from the International Monetary Fund and European Union. This situation
led these countries to lose their investment grade status as a result of downgrades
of their sovereign debt by the major ratings agencies.
In the case of Italy, growth was significantly slower than the Euro Area average.
Weak salary increases and a slow recovery of the job market penalised household
incomes. Business investments also struggled to develop due to uncertainty regarding
the economic situation, the persistent financial difficulties experienced by many
firms and credit market tensions. Slow growth made it difficult to reduce the
public debt, with the ensuing rise in long-term interest rates. In addition,
in July the spread between Italian government bonds and German Bund widened as
a result of market tensions, due to concerns arising from the uncertain economic
situation of the United States.
In the countries of Central and Eastern Europe belonging to the European Union,
economic growth continued at a slightly higher rate than the Euro Area average,
owing in particular to exports, the main driver of growth for most countries in
the region. With the exception of Poland, domestic demand of the area remained
weak, while showing a recovery. Growth was hampered by high unemployment and inflation
rates, as well as the short-term effects of the restrictive measures implemented
to slow the expansion of public debt, in addition to the persistent difficulties
on the credit market, which continues to be characterized by restrictive conditions.
The United States was characterized by a slowing recovery compared to the end of 2010. After falling
to 8.8% in early 2011, the unemployment rate rose back to 9.2% in June. In further
detail, the jobs added in the private sector were not sufficient to offset government
job cuts. Exports continued to benefit from the dollar depreciation. The outlook
for the public finances remains uncertain: in 2010 the budget deficit reached
a record of 10.6% of GDP.
In China, economic growth remained strong, with GDP up 9.6%. This strong growth, along
with the rise in the price of oil, caused a sharp rise in inflation (up 6.4%).
The economic policy authorities intervened decisively to contain the expansion
of credit with the aim of moderating inflationary pressures and preventing the
formation of speculative bubbles. The government also continued to implement structural
measures aimed at reducing exports and strengthening domestic demand by expanding
public spending.
Latin America continued to enjoy rapid economic growth driven by the rise in commodities prices
and exports towards rapidly growing areas, with China foremost among them. The
strong state of public finances, moderate inflationary pressures and high level
of currency reserves allowed these countries to emerge from the crisis before
other major world economies.
Economic indicators
In the Euro Area, the tendential inflation rate reached 2.7% (2.1% at 31 December 2010). The increase is primarily attributable
to the rise in the price of oil, which for Brent crude reached $112.48 a barrel
at the end of June ($94.75 at 31 December 2010). Inflation also continued to rise
in the United States, reaching 3.6% (1.5% at 31 December 2010), primarily due
to the weakness of the dollar.
Central banks adopted differing policies with regard to benchmark interest rates: in response to inflation, the ECB raised its rate to 1.5% from 1% at the end
of 2010, whereas the Federal Reserve adopted a policy of stabilization, keeping
the Fed Funds rate between 0.10% and 0.25%.
With reference to period-end exchange rates (used to convert items of the balance sheet into euro), it may be remarked that the euro appreciated against the Group's other main currencies
of operation, with the exception of the Swiss franc and Czech koruna.
With reference to average exchange rates (used to convert items of the profit and loss account into euro), the trend of the euro was different with respect to the Group's main currencies
of operation. In particular, the Czech koruna, Swiss franc and Israeli shekel
appreciated against the euro.
Bond and stock markets
In the first half of 2011, financial markets were characterized by periods of extreme volatility as a result of persistent
tension surrounding sovereign debt in the Eurozone. Markets were affected by concerns
of a contagion effect of the aforementioned crises in Greece, Portugal and Ireland,
which faced considerable financial difficulties.
On bond markets, the performance of government bonds reflected the tensions described in the
Eurozone, with a considerable widening of spreads between peripheral nations and
German Bunds.
The yield on ten-year German government bonds, which is the European benchmark
rate, rose from 2.96% at the end of 2010 to 3.03% at 30 June 2011. This trend
reflects in particular the contraction witnessed in the second quarter of the
year. Yields on ten-year U.S. government bonds fell from 3.29% in December 2010
to 3.16%.
The European two-year benchmark rate rose from 0.86% at the end of 2010 to 1.61%.
The rate curve thus flattened in the second quarter, reflecting the situation
of uncertainty on the financial markets.
The U.S. two-year benchmark rate declined from 0.59% to 0.46%.
Corporate bonds performed well.
Equity markets registered essentially positive performances during the half-year due to the
results achieved in the first quarter.
The sectors of the market that yielded the strongest performances were healthcare
(up 16.86%), automobiles (up 9.79%) and insurance (up 9.25%). By contrast, the
banking industry reported a decline (down 0.34%), concentrated in particular in
the second quarter of the year (-6.85%).
In the United States, equity indices were affected by the economic slowdown that
characterised the half-year, showing more moderate growth. |
last update on 12-09-2011 16:11
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