Business performance

World economy

Overview:
Global economic slow-down

Following the semi-recovery in 2010, the world economy1 cooled down again in 2011. Global gross domestic product increased by 2.6 percent. While the emerging regions registered a rise of 5.4 percent, the industrialized countries exceeded the prior-year level by a mere 1.3 percent. Persistently high risks emanating from the debt crises in Europe and the USA, and the decline in growth in Asia resulting from the measures introduced to combat inflation, had an adverse effect on economic development and also increasingly dampened investor and private consumer confidence.

Developments in 2011:
Declining dynamism as the year progressed

After the rapid, strong recovery from the severe recession during the period from 2010 to the first quarter of 2011, the global business environment exhibited a decrease in dynamism in the remainder of the year.

Industry and consumption:
Further increase in industrial output

With growth of around 6 percent, industrial production again expanded faster than private consumption, the latter rising by about 3 percent. While the export-dependent industries in particular posted – in part – significant increases, developments in the consumer-related sectors were correspondingly sluggish.

Regions:
Mature markets restrained,
emerging regions robust

Expansion in Western Europe’s gross domestic product was generally weak. With a plus of 3 percent in Germany, however, the region was able to achieve growth of just over 1.5 percent. The North American economy likewise grew very little through the year as a whole. Compared to the previous year, the region registered an increase in economic output of just over 1.5 percent. High commodity prices and a high unemployment rate, combined with only moderate increases in disposable income, greatly inhibited private consumption as a growth driver. Japan’s economy contracted by around half a percent as a result of its natural disaster. The emerging markets of Eastern Europe, Asia (excluding Japan), Latin America and Africa/Middle East exhibited robust economic growth compared to the previous year. In Eastern Europe, economic recovery continued with growth of around 3 percent. Russia stood out as one of the more dynamic economies of the region, posting expansion of 4 percent. Latin America registered strong growth of about 5 percent. The emerging countries of Asia increased their economic output by around 7 percent, with India and China once again leading the way.

Raw material prices:
Strong increase across the board

The high demand for raw materials, particularly in the emerging countries of Asia, led to a substantial rise in the associated prices in the course of the year under review. Commodities subject to these price developments included crude oil, ethylene, propylene, palm kernel oil, paper and metals. At around 110 US dollars per barrel, for example, the average price for crude oil for the year was almost 30 dollars above the level of the previous year. Raw material prices stabilized at a high level during the second half of the year due to the general global decline in economic growth rates.

Currencies:
Euro in the throes of the European financial crisis

Taking the annual average for 2011, the euro appreciated slightly against the US dollar, from 1.33 to 1.39. However, there was no clear trend as the year progressed. At the beginning of 2011 the euro rose steadily, occasionally reaching levels above 1.46 US dollars around the middle of the year. By the end of the third quarter, however, the euro was again trending weaker, and at the end of the year it had hit a low of 1.29 US dollars, with the European debt crisis as the primary cause.

Developments in the exchange rates of currencies important to Henkel are indicated in the following table:

Average rates of exchange versus the euro
  2010 2011
Chinese yuan 8.98 8.99
Mexican peso 16.75 17.31
Polish zloty 4.00 4.13
Russian ruble 40.26 40.91

US dollar

1.33 1.39

Download Excel table
Add Excel table to Download Center

Inflation:
Rise in global price levels

Global inflation has risen from just under 3 to 4 percent, due mainly to the strong increase in commodity prices. Consumer prices have risen in all regions, although developments were very mixed from one country to another. In North America and in Western Europe – and here particularly in Germany – inflation underwent a substantial rise. By contrast, developments in Japan were persistently deflationary. In China, inflation rose significantly, driven by strong growth coupled with high price increases, particularly for food products.

Unemployment:
Slight global decline to around 7 percent

In the industrialized regions, unemployment decreased slightly to 8 percent. In North America, the figure has remained high at around 9 percent. The labor market in Germany developed positively with the unemployment rate falling to just under 7 percent, noticeably below the prior-year figure. In the emerging regions, unemployment rates remained stable at about 7 percent. Around the world, unemployment decreased slightly to approximately 7 percent.

Developments by sector:
Slight increase in consumption

Growth in private consumer spending remained sluggish at around 3 percent. In the industrialized countries, consumers only spent 1 percent more in 2011 than in 2010. Consumers in North America increased their spend by about 2 percent. In Western Europe, consumer spending was only marginally above the prior-year level, with the rise coming primarily from Germany’s increase of about 1 percent. The emerging regions exhibited a higher propensity to consume with a plus of around 5 percent, matching the overall rate of regional economic expansion.

Industry shows robust growth

With growth of 6 percent, industrial production continued to increase more rapidly than the economy as a whole. The primary drivers in this development were the export-dependent industries, and here particularly electrical and electronic engineering, the transport sector and metal processing, each of which saw output substantially rise, benefiting from the increase in investment activity in the industrialized nations, and brisk export activity.

However, developments in industrial production were very mixed at the regional level. Manufacturing in Western Europe and North America expanded by something over 4 percent. Asia’s industrial output grew by around 8 percent. The contributions of the emerging countries of China, South Korea and India were particularly prominent in this regard, while Japanese manufacturing declined due to the natural and nuclear disasters suffered by that country.

Our important customer industries of transport and electronics saw production expand considerably, by around 7 percent. Strong growth was also generated in the automotive industry. Within the electronics sector, growth of relevance to us in basic products such as microchips and printed circuit boards was only slightly positive. Growth in the metals industry was a robust 8 percent. However, expansion in the consumer-related sectors such as the global packaging industry was sluggish, joining food products, beverages, paper and printing with growth in the lower single-digit range. After several years of decline, construction avoided contraction in 2011. While building activity in the emerging regions was extremely brisk, North America and Western Europe registered declines of 9 and 1 percent respectively.

1 Source of world economic data: Feri EuroRating Services, January 2012.