GENERAL MEETING DRAFT - Bankier.pl

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However, indicators of economic activity from business confidence surveys keep signaling a rather
sustained momentum. After collapsing to historical lows at an unprecedented speed, business confidence
surveys have resumed growing, and have returned to levels consistent with expansion in economic
activity, following widespread improvement in all components. The most significant improvements were
especially reported in new order components, which, in the Eurozone, returned to the levels prior to the
economic crisis. As regards the PMI manufacturing index, in October 2009 it moved into an expansionary
territory, and in December stood at 51.6, which is a long way from the low of 33.5 reported in February
2009. Similarly, in the US the ISM manufacturing index rose from 35.6 in January 2009 to 55.9 in
December
Clearly, the crisis also had a major impact on labor market conditions. The widespread reduction in
manufacturing resulted in a sharp reduction in jobs. In 2009, the US economy lost a total of 4.7 million
jobs (compared to 3.8 million in 2008). The decline was significant and led to a considerable increase in
the unemployment rate, which hit 10%. In the Eurozone, the labor market showed greater resilience due
in part to employment support schemes that limited job losses. Furthermore, even though the labor
market is experiencing the first tentative signs of improvement, the major risk is that it will remain weak for
most of 2010 due to the heavy underutilization of the labor force.
In terms of prices after remaining in negative territory for five months (from June to October 2009), in
November inflation (the HICP index) in the Eurozone returned in positive territory figure (+0.5%) and was
up by 0.9% in December due to an unfavorable base effect on energy prices (in fact, at the end of 2008,
oil prices were in free fall). On the other hand, after providing a significant contribution to the decline in
total inflation at the beginning of the year, in the second half of the year inflation of food products
continued on a downward trend.
As for monetary policy, after bringing the refi rate to 1.00%, the European Central Bank (ECB) took
several steps to provide an effective resolution of the financial crisis and to support the real economy by
buying covered bonds and extending cash refinancing operations for banks in order to revitalize one of
the markets most heavily hit by the financial crisis and to reopen a significant source of financing for the
banking industry.
In the US, after reducing the Fed Funds rate to an all-time low (in a range of 0 to 0.25%), the Federal
Reserve implemented a "Quantitative Easing" policy by injecting liquidity into the market through the
purchase of government securities, and by increasing the TALF (Term Asset-Backed Securities Loan
Facility).
The first signs of improvement in economic activity brought about a euphoric reaction in equity markets,
which reported increases of 20 to 30% in just over two months. At the same time, yields on the longest
part of the yield curve rose significantly, hitting a level of 4% for the ten-year maturity in the US and 3.70%
in the Eurozone. However, this increase in bond yields was interrupted during the summer when
indications from the real economy ceased to paint a clear picture of a recovery and left the impression
that the road out of the recession was still rather long.