Annualreport

Economic Climate
Global
During 2011, much of the global economy's
performance was conditioned by the European periphery's sovereign debt crisis which has
dragged the eurozone towards slower growth and, in general, more volatile asset markets,
and given investors negative expectations. The tougher attitude towards granting loans to
families, along with financial uncertainty, have slowed down the dynamic pace of consumer
spending and affected the real performance of most of those economies, including the ones
like the German economy whose behavior is sounder. Unemployment in the eurozone in
October reached 10.3% and in net terms 634,000 jobs were lost in the last six months. By
contrast, and although this may bear no relation to the crisis, the US economy's GDP grew
around 2% in 2011, while the jobless rate fell, closing at 85 % in December (versus 9.4% a year
earlier). On the other hand, a vigorous and growing web of trade relations within the emerging
economies has meant that, in that space, economic growth during 2011 has remained
satisfactory. However, it is important to point out that China and Brazil, the two major
emerging economies in Asia and Latin America respectively, both registered somewhat slower
growth rates. In particular, the Brazilian economy's interannual growth was 2.2 % in the third
quarter, the worst registered since the start of the recovery towards the end of 2009.
United States
The main outcome of the positive rate of private spending in the United States is a substantial
improvement of consumers' expectations. In November the Conference Board Consumer
Confidence Index registered its highest monthly increase in the last 145 years (from 40.9 to
56.0 points). One indication that consumer spending is recovering is that retail sales are doing
well, having risen 5.6% in interannual terms in November. In the job market (to December)
twelve successive months of net employment earnings were accumulated and almost 2.5
million jobs recovered over a 21-month period. Nevertheless, there is still a long way to go to
recover the 8.7 million jobs lost during the crisis. The deep imbalances observed in the US
real estate market have gradually, but very slowly, been corrected. As of November sales of
used and new homes continued to rise (4% and 1.6% month over month), gaining some
momentum in the last part of the year. However, a context of high inventories still prevails,
hampering the stabilization of real estate prices and hence the ability to curb on the one hand
the deterioration in the value of one of the fundamental assets in the equity of US households,
and on the other, the ability to give the industry a new kickstart by generating jobs and the
demand for basic inputs that this would involve.
29 Mercantil Servicios Financieros