Economic parameters for 2016/17

Global economic momentum weakened further over financial year 2015/16, although developments were mixed again. Supported by central banks’ expansionary monetary policy, Western and Central Europe recorded overall robust growth rates. Meanwhile, overall economic developments were more subdued in Eastern European and Asian emerging markets. Altogether, with a rate of just over 2 per cent, global economic growth in 2016 fell slightly short of the previous year’s level (2.5 per cent).

All in all, we expect the global economy to continue to register below-average growth in 2016/17. The mature Western European markets are expected to experience a slight weakening of their currently solid growth rates due mostly to the upcoming exit of the United Kingdom from the European Union. While this will significantly dampen the growth outlook for the United Kingdom, the impact on the EU member states is likely to remain very limited. At the same time, the ongoing low-interest-rate environment will continue to support growth during the current financial year. In addition, unemployment continues to decline across most of Western Europe, bolstering private demand.

We expect the US economy to return to stronger growth rates of above 2 per cent in financial year 2016/17, following an overall weak previous year – despite a certain recovery over the course of the year. The specific impacts of the US election are difficult to gauge at this point in time.

Following the past two years’ below-average growth trend, many emerging market economies are also expected to regain momentum. However, the extent of their recovery will also depend on potential interest rate hikes in the United States, which would redirect money flows away from emerging markets. Any rate hikes in the United States are likely to be very gradual, though. Global central banks’ monetary policy generally remains rather expansionary. In the European Monetary Union in particular no rate tightening should be expected in 2016/17.

In spite of the short-term stabilisation of the Chinese economy, a sharper medium-term downturn due to persistent imbalances remains a risk in China. However, growth is only likely to slow slightly from its current high level in financial year 2016/17 as the Chinese government continues to support the economy with fiscal and monetary policy interventions.

Following two challenging years marked by a sharp economic downturn, the Russian economy probably bottomed out at the end of financial year 2015/16. Although parameters remain difficult despite the slight stabilisation of oil prices, we expect the Russian economy to register modest growth in financial year 2016/17.

Following persistently low inflation rates and in part deflationary trends in financial year 2015/16, particularly in Western and Central Europe, we expect inflation to accelerate slightly in financial year 2016/17 as the recent moderate increase in oil prices is beginning to translate into higher price increases after two years in which low energy prices dampened inflation. At the same time, financial year 2016/17 is likely to be another year in which food prices increase faster than consumer prices overall. However, food price inflation is likely to remain distinctly below 2 per cent in Western Europe. As a result, and due partly to persistently subdued demand, particularly in the Eurozone, the overall inflation rate is likely to also remain below 2 per cent in 2016/17.

Against this background, we expect growth in financial year 2016/17 to only slightly exceed the growth rate recorded during the reporting period. After just over 2 per cent in 2016, we project growth of about 2.5 per cent in 2017. Overall, the global economy has not yet returned to a path of sustainable economic growth following the financial and sovereign debt crisis.


The German economy grew slightly faster again than the Western European average in financial year 2015/16. After three years of growth rates above 1.5 per cent, we expect economic momentum to decline slightly to 1.5 per cent in the current year. Given the persistently unfavourable global economic environment and the upcoming Brexit, domestic factors, particularly public and private consumption, are likely to remain the key driver of growth. Positive employment trends and rising real wages will continue to provide for a favourable consumption and retail environment. All in all, we therefore expect retail in Germany to experience another year of robust nominal growth rates of about 2 per cent.

Western Europe

In Western Europe, economic growth is also expected to weaken somewhat after three years of solid growth. This is due mostly to Brexit, although we expect the negative impact to remain very limited outside of the United Kingdom. At the same time, the low-interest-rate environment continues to support growth. The continuous decline in unemployment across Western Europe also provides for overall solid parameters for private consumption. We therefore expect the Western European economies to post real growth above 1 per cent in financial year 2016/17, with the Spanish economy likely to continue to grow faster than the Western European average. We project overall below-average growth rates for Italy. In spite of solid short-term parameters, persistently high public indebtedness and the ongoing need for structural reforms dampen the medium-term growth outlook.

Consumption and retail are benefiting from the slow, but steady decline in unemployment. Following overall solid nominal retail sales growth of just over 1.5 per cent in financial year 2015/16 compared with the previous years, we expect retail sales growth to remain roughly stable in financial year 2016/17. Here, too, we expect to see above-average growth in Spain in particular.

Eastern Europe

Developments in Eastern Europe remain divided: we continue to project relatively robust growth of about 2 to over 3 per cent in the Central European countries while the economic environment will remain challenging in Russia and Ukraine. All in all, though, both countries seemed to have reached a bottom towards the end of financial year 2015/16. As a result, we expect growth rates of about 1 per cent in financial year 2016/17, with Russia also benefiting from the overall stabilisation of oil prices. Meanwhile, the weaker economy and political uncertainties in Turkey are likely to translate into lower economic momentum in this country.

Divided developments across Eastern Europe are also reflected in the retail outlook: we continue to project robust retail sales growth in the Central European countries in financial year 2016/17. In Russia and Turkey, sales will continue to be fuelled mostly by price increases although inflation will continue to subside, at least in Russia. Adjusted for inflation, we therefore project another real decline in retail sales in Russia and at best a slight increase in Turkey.

In the medium term, we anticipate that economic momentum in Eastern Europe will increase and the persistently high degree of catch-up potential will be fully tapped.


In spite of China’s loss of economic momentum and slow growth in Japan, Asia’s emerging markets remained the fastest-growing region for METRO GROUP in financial year 2015/16. This statement is likely to also apply to financial year 2016/17. However, uncertainty over the extent of the economic downturn in China persists. The Indian economy, in turn, is likely to record growth of over 7 per cent again in financial year 2016/17, once again outgrowing all other countries in which METRO GROUP operates. In the near future, Japan’s economy will remain dependent on expansionary monetary and fiscal policies, which exacerbates long-term problems due to the country’s high public indebtedness. As a result, however, we foresee moderate growth of 1 per cent for 2016/17.

China and India should continue to record nominal retail sales growth in the high single digits or low double digits. The price-adjusted growth rate is anticipated to be in the medium single-digit range in both countries while the saturated Japanese market is likely to see only moderate retail sales growth.

Building on our forecast for economic and retail sector developments, the following section provides an overview of the resulting implications for individual sectors as well as our sales lines.