A4 für Copyshop GB.indd - Bayerische Landesbank

22 Economic situation
} Strong demand
from abroad boosts
economic growth
} Hike in oil prices
curbs private
consumption
Economy:
No stable uptrend yet
In 2004, the German economy finally transcended an unremitting three-year slump.
Real gross domestic product increased by 1.6 percent. The economy was characterised
by two opposing trends: exports experienced a brisk upswing (+ 8.2 percent), while
domestic demand was sluggish (+ 0.5 percent). Household consumption stagnated,
the rise in corporate investment fell far short of estimates, while the construction
industry experienced a recession for the ninth successive year. The still lacklustre
economic trend was reflected in the high number of corporate failures. In 2004, there
were almost 40,000 corporate insolvencies, with losses totalling more than EUR 30 bil-
lion. Experience shows that a surge of corporate failures only tends to recede during
the early stages of an upturn. This means that brighter prospects can only be antici-
pated from 2005.
In 2004, for the first time in several years, Germany was able to close ranks with its
neighbours in the euro area in terms of economic growth. This was only achievable,
however, thanks to strong demand from abroad. It was also partly due to the higher
number of working days. All in all, the pace of recovery in 2004 remained slack in
comparison to previous rebound phases. In particular, it was insufficient to mitigate
the serious problems evident in the labour market and the public sector.
The revival of the global economy was not least attributable to strong growth in the
United States. With a growth rate of 4.4. percent, the US economy once again began
to gather momentum. Besides the USA, the South East Asian economies were another
driving force of global trade, with China in the lead. The Western European economy
also experienced a rebound during 2004. However, at 2.0 percent, the pace was signifi-
cantly slower than that of the global economy. The global economic upswing was par-
ticularly remarkable given the fact that economic activity was curbed by the increase in
the price of crude oil. High prices can also be expected in the medium-term due to the
strong upswing in demand for crude oil, as well as bottlenecks in its production and
processing.
In Germany, the fall in purchasing power caused by increased oil prices acted as a
brake on private consumption. Household consumption, the most significant constitu-
ent of the domestic product, was therefore disappointing once again. An extremely
unfavourable labour market was a further strain on the economy. Although the labour
force actually increased by 271,000 members over the course of the year, this was
countered by a fall of 337,000 in the number of positions subject to social security
contributions. The average unemployment level for 2004 remained very high, totalling
4.38 million.
Low growth rates in consumer income are principally reflected in the subdued private
consumption of recent years. In addition, concerns relating to job and pension security
have increased. The spirited debate surrounding the reform of the labour market