Economic Environment

1. MACROECONOMIC DEVELOPMENT

The economy in Germany also recorded an upswing in 2018: GDP increased by 1.5 per cent (previous year: 2.5 per cent). However, in comparison to the previous year and the forecasts, this growth was significantly more subdued. This was due to factors including a weakening of foreign business attributable to an economic slowdown in Germany's most important sales markets, problems facing the automotive industry, which had to significantly scale down production on account of new EU inspections in connection with new vehicle registrations, and increasing production-side bottlenecks, primarily with regard to the labour force. The domestic economy in particular had a positive impact on this development. In 2018, inflation rose to 1.8 per cent (previous year: 1.7 per cent) as a result of, among other factors, rising energy prices. The economic upturn also had an impact on the labour market: at 3.2 per cent, unemployment was lower than it had been in the previous year (3.8 per cent).

GDP in Austria grew by 2.8 per cent (previous year: 3.0 per cent) in 2018, significantly higher than the forecast of 1.9 per cent. Despite a global economic slowdown, this was due in particular to robust domestic demand, which was bolstered by both private consumption and investments, as well as continued increasing foreign demand. The economic upturn positively influence the labour market here too, with the unemployment rate falling to 4.8 per cent (previous year: 5.5 per cent). Energy prices remained a key factor driving prices in 2018: inflation in 2018 amounted to 2.1 per cent (previous year: 2.2 per cent).

In 2018, the economy in Italy grew at a less pronounced rate (1.0 percent) than in the previous year (1.6 per cent). This development was underpinned by higher investments, which were offset by sluggish consumption and an increase in imports as exports stagnated. One of the reasons for this development is the political situation in the country, which is leading to a loss of confidence among consumers, companies and investors. Unemployment fell to 10.7 per cent (previous year: 11.2 per cent), due among other factors to a positive industry development. Inflation fell to 1.2 per cent (previous year: 1.3 per cent).

The economies in the Central and Eastern European countries in which the REWE Group is represented developed positively in 2018. Bulgaria, Croatia, Romania, Russia, Slovakia, the Czech Republic, Ukraine and Hungary all experienced an economic upturn, with Slovakia and Ukraine exceeding forecasts and prior-year growth rates. GDP growth in Bulgaria, Croatia and Hungary was at the same level as in the previous year but above what had been forecast. GDP growth in Russia increased year on year. Compared to the previous year, Romania and the Czech Republic recorded lower economic growth; nevertheless, the Czech Republic exceeded expectations. The upswing was attributable primarily to private consumption, which benefited from positive situation on the labour market and the increase in real wages, as well as investments, which increased due in part to EU funding. With the exception of Russia and Ukraine, unemployment rates fell in all countries, in some cases noticeably. Inflation in Russia, the Czech Republic and Ukraine fell, in part significantly, compared with the previous year. Inflation in the other countries increased year on year and in some cases significantly exceeded forecasts.

In Scandinavia, Sweden and Norway recorded higher economic growth than in the previous year. While economic growth in Denmark was less dynamic than in the previous year, it did exceed the forecasts. Inflation in Sweden and Norway remained level year on year, while price rises in Denmark were less pronounced than in the previous year. Unemployment again fell in each of the three countries.

With GDP growth of 3.0 per cent, the economy in Switzerland was significantly stronger than in the previous year (1.7 per cent) and exceeded expectations (1.3 per cent). However, all signs pointed to a slowdown in the second half of 2018. The ongoing upturn continued to be reflected in labour market: unemployment fell to 2.8 per cent (previous year: 3.2 per cent) and was thus below the forecast of 3.0 per cent. Inflation increased significantly to 1.1 per cent (previous year: 0.5 per cent), which was due to factors including high oil prices during the year.

In the United Kingdom, economic growth in 2018 was 1.4 per cent, down year on year (previous year: 1.8 per cent) and slightly below expectations (1.5 per cent). This is due to the continued uncertainty surrounding the consequences of the UK leaving the EU (Brexit), which among other things has led to businesses putting investments on hold. Despite a robust labour market (unemployment declined from 4.4 per cent in the previous year to 4.2 per cent), private consumption decreased in part due to stagnating real incomes on account of inflation, and will increasingly be financed by private debt. Inflation decreased slightly to 2.5 per cent (previous year: 2.7 per cent), which again was primarily due the devaluation of the pound since the Brexit referendum.

In 2018, the economy in France grew at a less pronounced rate (1.5 percent) than in the previous year (2.3 per cent). In addition to a global economic slowdown, the economic development was influenced in part by strikes and higher taxes, particularly in the first half of the year, and the social unrest that began in late November with the "yellow-vest" protests. A noticeably more subdued increase in consumption was offset by industry developments: capacity utilisation was at its highest level since 2008. Although the unemployment rate declined slightly from 9.4 per cent in the previous year to 9.1 per cent, it remained high compared to the rest of Europe. Inflation rose from 1.2 per cent to 2.1 per cent.

 

Changes in economic data for REWE Group countries
in %¹GDPInflationUnemployment
20172018p*2018p20172018p*2018p20172018p*2018p
Germany2.52.31.51.71.61.83.83.33.2
Austria 3.0 1.92.82.21.82.15.55.14.8
Czech Republic4.32.63.12.42.12.22.92.72.2
Italy1.61.41.01.31.21.211.210.910.7
Hungary4.03.44.02.42.82.84.24.03.7
Romania6.94.44.01.12.54.44.95.14.6
Slovakia3.43.73.91.41.72.68.17.06.8
Russia1.51.71.73.73.92.85.25.55.5
Bulgaria3.63.23.61.21.62.46.25.55.3
Switzerland1.71.33.00.50.61.13.23.02.8
United Kingdom1.81.51.42.72.52.54.44.64.2
Sweden2.12.42.41.91.81.96.76.56.3
Lithuania3.93.53.72.77.16.1
Norway1.91.62.11.92.01.94.23.83.8
Denmark2.31.82.01.11.61.05.75.65.1
France2.31.51.22.19.49.1
Ukraine2.53.23.514.410.010.99.29.39.4
Croatia2.82.72.81.31.61.611.19.99.7
  • Sources: International Monetary Fund, World Economic Outlook Database October 2018, Update January 2019; Joint forecast (Autumn 2018)
  • p = projected; p* = projected in previous year
  • 1 Year-on-year GDP change in %