Slowdown in global economic growth
Although overall the global economy grew at a similar rate in 2018 as it did the year before, the pace of growth dropped off noticeably in the second half of the year. The International Monetary Fund (IMF) 1) estimates that price-adjusted growth was 3.7 per cent in 2018, a fall of 0.1 percentage points compared with 2017. The economy weakened in the emerging markets in particular, mainly because of the interest-rate hikes in the USA and the strength of the US dollar. Generally speaking, the export-oriented economies suffered most from the slowdown in global growth. Oil-exporting nations proved to be an exception, with rising oil prices until autumn 2018 shoring up their economies.
As a result of the escalation of the trade dispute between the USA and China, the global economy continued to deteriorate in the second half of 2018.
In 2018, the US economy bucked the global trend with a growth rate of 2.9 per cent that was once again up on the previous year and also high compared with historical levels. The US administration’s fiscal measures, particularly the reforms that came into effect at the beginning of 2018 to reduce taxation for households and companies, had a stimulating effect on growth.
GDP in China advanced at a slightly slower rate than in the prior year. This general slowdown in economic expansion in China coincided with the imposition of customs tariffs by the USA.
The high rate of growth in the eurozone, which had been a feature of the second half of 2017, dropped off in 2018. Weaker foreign trade had a particularly negative impact here. Protectionist US trade policy and the associated concerns about further escalation of the trade dispute between the USA and the EU and China took their toll on exports. The rates of growth in the individual member states increasingly diverged. Additional factors that came into play temporarily during the summer months, such as problems in the automotive industry related to the switch to new emissions testing standards, even led to some quarters of negative growth in Germany and Italy.
Growth in the German economy dropped off in 2018 because of its dependency on exports. Increases in exports to countries outside the EU were particularly below par. In addition, the protracted attempts to form a government resulted in the postponement of spending and thus a temporary weakening of demand at federal government level at the start of the year. According to IMF estimates, the German economy grew by 1.5 per cent in real terms last year.
An absence of reforms and a banking sector burdened with poor profitability and a high volume of non-performing loans are the structural factors behind the weak growth in the Italian economy. Difficulties in forming a government and the budget dispute with the EU also weighed on economic growth in Italy last year. In France, consumer spending weakened as a result of tax increases and falling real wages. The yellow vest protests held in late 2018 that saw people take to the streets in high-vis jackets had a negative impact on the country’s economic growth. By contrast, the Spanish economy maintained its upward trajectory in 2018, albeit at a somewhat slower pace. The rate of growth, which was above the EU average but down on the prior year, reflects the diminishing catch-up effects following the country’s rebound from its severe economic crisis. Consumer spending increased again thanks to a fall in the unemployment rate. However, the number of people who are out of work in Spain remains very high.
Year-on-year GDP growth in the aforementioned countries and regions
Mixed trend in DEUTZ’s customer industries
In 2018, DEUTZ’s main customer markets largely performed well. Demand for construction equipment and material handling applications rose across all regions. The agricultural machinery market grew in North America, whereas demand in China and Europe fell.
DEUTZ customer industries in 2018
|Construction equipment||3 1)||4 2)||24 3)|
|Material handling||9 4)||3||13|
|Agricultural machinery||-5 5)||4||-16|
|1) Off-Highway Research, ‘European Mid-year Review’ August 2018.
2) PSR, ‘OE Link Update Bulletin Q3 2018’.
3) PSR, ‘OE Link Update Bulletin Q4 2018’.
4) FEM, ‘World Industrial Trucks Statistics – Information Sheet Q4 2018’.
5) VDMA, ‘Business Climate and Market Development in Europe’ November 2018.
1) IMF, ‘World Economic Outlook Update’, January 2019.