Economic environment

Global economic growth remained weak in 2015

As in previous years, the economy did not live up to expectations in 2015. Forecasts were successively lowered as the year progressed. The reporting year was shaped by various factors, including geopolitical crises, weak growth in emerging markets, lower prices for commodities, oil, gas and agricultural goods, quantitative easing (particularly by the European Central Bank [ECB]), the first interest rate hike carried out by the US Federal Reserve at the end of the year, strong exchange rate movements and waves of migration to Europe. These factors resulted in palpable uncertainty and a reluctance to invest, although European exports received a small boost from the weak euro exchange rate.

The International Monetary Fund (IMF) 1) is expecting worldwide growth of 3.1 per cent for 2015 as a whole, which is below the 2014 level of 3.4 per cent. The eurozone economy expanded by 1.5 per cent in 2015, which is considerably stronger than the 2014 rate of 0.9 per cent. The German economy’s growth was on a par with 2014 at 1.5 per cent. Spain’s economic performance was very encouraging – despite the country only having emerged from recession in the previous year – with growth of 3.2 per cent. Italy also moved out of recession, expanding by 0.8 per cent. There was also positive news from France, where the economy grew by 1.1 per cent.

As in 2014, the US economy was one of the major drivers of global economic growth. It expanded by 2.5 per cent (2014: 2.4 per cent) thanks, in particular, to favourable conditions in the labour market.

At 6.9 per cent, the pace of growth in the Chinese economy continued to slow. This trend is set to continue in the years ahead. Conditions remained difficult in the truck and construction equipment sector, which is a core market for DEUTZ. The Russian economy slipped into recession due to the crisis and sanctions; the growth engine was still not running smoothly in South America either.

Weakness in DEUTZ’s customer industries

Demand in our main customer markets fell in 2015. According to DEUTZ’s own estimates, demand for construction equipment – excluding the effect of the advance production of engines – was down by around 10 per cent in Europe and was unchanged year on year in North America. In China, however, demand fell by around 44 per cent 2). According to the VDMA 3), the agricultural machinery sector in Europe contracted by 8 per cent in the year under review. The market for medium and heavy-duty trucks contracted by 29 per cent in China 4).

1) IMF World Economic Outlook, January 2016.
2) China Construction Machinery Association, January 2016; own estimates.
3) Konjunkturbulletin of the German Engineering Federation (VDMA), November 2015.
4) China Automotive Information Net, January 2016.