Macroeconomic and sectorspecific parameters1

Global economic developments were mixed over the last year. In the USA, growth developed positively after a disappointing start to the year, and in the countries of Western Europe, the recovery also generally continued. The economies of the Eurozone were supported by low oil prices, the weak euro/US dollar exchange rate and low interest rates. Developments in Eastern Europe, in contrast, remained divided, with generally stable trends in Central European countries on the one hand, and Eastern European countries whose economic developments remained overshadowed by the Russia/Ukraine conflict on the other. Growth weakened in Asia, particularly in China. However, as a whole, the region continued to record the strongest growth rates of all regions in which METRO GROUP is active. Altogether, with a rate of 2.4 per cent, world economic growth in 2015 remained at a similar level to that seen in the previous year (2.4 per cent).

At the same time, many political crises and conflicts intensified during the year, particularly in the Middle East. On the other hand, there was also some slackening of tension through the signing of the atomic treaty with Iran in mid‑2015. In Europe, the political agenda was dominated by the Russia/Ukraine conflict and the looming state bankruptcy of Greece. The former led to significant economic problems in Ukraine and continued to negatively impact Russia’s already sluggish economic performance. Declining investor confidence and the sanctions imposed by the European Union and the USA, combined with the falling price of oil, resulted in a marked drop in Russian economic output. While the Greek debt crisis was a major topic in the political arena, its economic impact on Western Europe remained altogether small.

In financial year 2014/15, the euro depreciated substantially against the US dollar. One reason for this was the expansionary monetary policy of the European Central Bank with its programme of purchasing government bonds. At the same time, the Asian currencies of relevance for METRO GROUP gained in value against the euro. The Ukrainian hryvnia, the Russian rouble and the Kazakhstani tenge, on the other hand, sharply lost value against the euro due to the weakness of their economies and the continued fall in the price of oil. As a result of the devaluation of the currencies, the consumer prices in these countries rose at double-digit rates. Because of the Russian ban on imports of Western foodstuffs, the rise in food prices even exceeded the average inflation rate. After high rates of price increase in the previous years, Turkey and India saw their inflation fall slightly, thanks above all to the low price of oil. The decreasing energy prices are also the principal reason for the low inflation rates, with sometimes even deflationary tendencies in most other European countries. On average, consumer prices in the euro countries stagnated in 2015. At the same time, food prices only rose at a below-average rate of around 0.5 per cent.

In relation to the regions in which METRO GROUP operates, the economy of Western Europe continued to recover in financial year 2014/15, with growth stronger than in the year before. Compared to other Western European countries, Germany once again recorded an above-average development. Central European countries benefited from the recovery thanks to their economic ties to Western Europe and experienced somewhat stronger growth than in 2014. In contrast, the economic situation in the emerging countries of Eastern Europe – particularly in Russia and Ukraine – was considerably more strained, due in part to political crises. Altogether, therefore, the economic performance of Eastern and Central Europe declined in financial year 2014/15. The emerging countries of Asia once again recorded the highest growth rates; the Chinese economy, however, slowed down. Thanks to the fact that Japan recovered somewhat better from the recession of 2014, growth in Asia in 2015 amounted to around 3.8 per cent in total, a slight increase compared with the previous year.

The numbers indicating the development of gross domestic product in the chapter “macroeconomic and sector-specific parameters” represent the entire years of 2014 and 2015. As such, the figures for 2015 represent projections. Unless otherwise indicated, the qualitative statements in the text refer to the reporting period.

Development of gross domestic product in key global regions and Germany
Percentage change year-on-year

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20141

20152

Source: Feri

1

Previous year’s figures may deviate from those shown in the Annual Report 2013/14 if the final figures were not yet available at the time of its completion

2

Forecast

World

2.4

2.4

Germany

1.6

1.6

Western Europe (excl. Germany)

1.3

1.5

Eastern Europe

1.4

−0.4

Asia

3.6

3.8

Mixed development in consumer goods retailing

Because of the differences in economic development in the regions in which METRO GROUP operates, the business development was also mixed. In Western Europe, the economic recovery is reflected in rising retail sales – albeit starting from a low level. At just over 1 per cent, growth was altogether only moderate. In Eastern and Central Europe, the retail figures differed. While the Central European countries reported robust growth in excess of 3 per cent, price-adjusted retail sales in Russia and Ukraine fell. Despite a slight slowdown, the emerging countries of Asia once again enjoyed the highest growth rates.

Germany

Compared with other Western European countries, Germany once more developed at an above-average rate. Declining unemployment and growing disposable incomes bolstered private consumption and retail, which thus emerged as the key drivers of economic growth. Overall, non-food retail posted stronger nominal sales growth than food retail. In the non-food sector, apparel retailing was the key exception, as it suffered a decline. At the same time, online retail continued to grow and expanded its market share.

Western Europe

In Western Europe, low oil prices, the low euro/US dollar exchange rate and low interest rates resulting from the European Central Bank’s bond purchase programme served as a short-term economic stimulus programme. On the other hand, uncertainties over Greece’s possible exit from the Eurozone were a repeated cause of concern for the Eurozone countries. However, with a rate of 1.5 per cent, the Eurozone countries recorded an improvement in growth in financial year 2014/15. Thanks to the economic recovery, unemployment fell slowly but steadily. This also brought about recovery in the retail sector. After three poor years, retail succeeded in growing by more than 1 per cent. At the same time, consumer prices virtually stagnated, resulting in a price-adjusted increase of similar amount.

Altogether, the heterogeneity of the countries was somewhat less pronounced than in the previous years. The development in Spain was particularly pleasing. The country was not only able to record one of the highest GDP growth rates, but also the highest retail growth rate. In Italy, on the other hand, the recovery was below the Western European average.

Eastern Europe

Despite a short-term stabilisation following the second Minsk agreement, economic developments in Eastern Europe were overshadowed by the Russia/Ukraine conflict, which negatively impacted these two countries’ economies in particular. In addition, low oil prices weighed on Russia’s economy. At the same time, the currency devaluations resulted in markedly higher inflation in both countries compared to the corresponding period of the previous year. As a result of the self-imposed ban on imports, grocery prices in Russia increased by a disproportionate amount. The difficult economic operating conditions also impacted negatively on the retail business. Retail sales continued to rise in nominal terms because of the above-average price increases, but declined sharply in price-adjusted terms. In turn, the Central European economies – Poland, Czech Republic and Slovakia – recorded overall robust economic developments. The retail business also benefited from this, enjoying sound growth at a nominal rate of over 3 per cent. In Turkey, where economic growth stabilised, retail sales achieved nearly double-digit nominal growth, which, after price adjustment, was still equivalent to a very reasonable rate of about 4 per cent. In the Balkan countries, Romania, in particular, enjoyed strong nominal retail growth of more than 5 per cent, while retail sales in Bulgaria, Croatia and Serbia weakened.

Asia/Africa

The emerging economies of Asia once again posted the strongest growth in financial year 2014/15. However, overall growth in China has weakened. India, in turn, experienced positive momentum, posting economic growth rates above 7 per cent. Retail sales in both countries recorded double-digit nominal growth during the reporting period. In India, however, half of this growth was due to the increase in prices. Supported by expansionary monetary and fiscal policies, Japan’s economy is slowly climbing out of recession. While the retail business continued to stagnate in financial year 2014/15, a positive trend could be seen towards the end of the period.

Development of gross domestic product in METRO GROUP countries
Percentage change year-on-year

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20141

20152

1

Previous year’s figures may deviate from those shown in the Annual Report 2013/14 since the final figures were not yet available at the time of its completion

2

Forecast

India

7.1

7.3

China

7.3

6.8

Vietnam

6.0

5.9

Pakistan

3.4

4.1

Czech Republic

2.0

4.0

Luxembourg

5.6

4.0

Romania

2.8

3.6

Poland

3.3

3.5

Spain

1.4

3.2

Sweden

2.3

3.2

Turkey

2.9

3.1

Slovakia

2.4

2.9

Hungary

3.6

2.7

Bulgaria

1.7

2.1

Kazakhstan

4.3

2.0

Netherlands

1.0

2.0

Serbia

−1.8

1.7

Germany

1.6

1.6

Portugal

0.9

1.6

Belgium

1.1

1.2

France

0.2

1.1

Croatia

−0.4

1.1

Switzerland

1.9

1.0

Italy

−0.4

0.8

Austria

0.4

0.7

Japan

−0.1

0.6

Moldova

4.6

−1.0

Greece

0.8

−1.9

Russia

0.6

−4.1

Ukraine

−6.8

−14.6