Earnings, Financial Position and Net Worth

Economic environment

Global economic growth slowed notably in the first quarter of 2008. Despite huge key rate cuts by the Fed, the crisis in the real estate market and the ensuing problems for the financial sector placed a noticeable burden on the US economy. A number of indicators show that there is an increasing likelihood of a recession. By contrast, the continued growth momentum of emerging economies such as China and India was the principal engine of global economic expansion. This is unlikely, however, to make up for negative stimulus from the USA, which is the reason why global economic momentum is expected to slow over the year 2008 as a whole. The extent to which this will happen depends on how the crisis in the financial markets develops and on how robust the economies of Europe and Asia prove. The International Monetary Fund currently anticipates global growth of around 4.1 % for 2008 as a whole.

The economic outlook in the euro zone has also deteriorated in recent months. Alongside the effects of the crisis on the financial markets, additional causes are the strong euro and the high inflation rate. Moreover, important trading partners such as Great Britain or a number of Central and Eastern European countries are showing the first signs of an economic slowdown. Beyond this, the former boom regions of Spain and Ireland in particular are experiencing a cooling of the previously very brisk construction activities. Nonetheless, the still good profit situation of companies and the high levels of capacity utilization are proof that the economy in the Euro area is in a more robust state than that of the USA. Accordingly, there are no expectations of a recession, although growth is expected to lose momentum. The International Monetary Fund has issued a downward revision of its 2008 forecast for the euro zone, from 2.1 % in October to 1.6 %.

During the first quarter of 2008, the economic situation in Germany was robust. Over the course of the year, however, additional stimulus from exports is not anticipated due to the weaker global economy and the appreciation of the euro against the US dollar. The main impact on economic growth in Germany is therefore the domestic economy, which is currently being burdened by price hikes for energy and food. Even if the economy is likely to have peaked, it is probable that economic growth will hold steady, albeit at a slower pace. In their spring forecast, the leading German economic research institutes predict a gross domestic product growth rate of 1.8 % for the year as a whole (October 2007: 2.2 %).