Macroeconomic Conditions

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The global economy has recovered slightly after the sharp economic downturn. In particular the global stimuli packages contributed to the slight growth reported by most countries in Q3 2009 compared to the prior quarter. However, year-on-year the decrease remained significant. Overall, the retail sector was less affected by the economic crisis, although its development continued to decline also in H2 2009 due to increasing unemployment figures. Additionally, declining prices, especially in Western Europe, were noticeable year-on-year, which in fact support the propensity to consume, but overall increase the nominal retail sales decline. Moreover, food sales being more crisis-resistant were less affected by the economic crisis than non-food sales.

Due to its high dependency on exports, the German economy has seen an above-average affliction from the economic downswing. At the same time, Germany was among the first Western European countries to return to showing moderate growth thanks to the global economic recovery. Although the car scrap bonus supported private consumption, it re-directed purchasing power away from other retail segments. Declining retail prices had a positive impact on consumer purchasing power. Additionally, short-time work prevented a greater rise in unemployment. All in all, retail sales declined, as expected, but to a lesser degree than the total economy decline.

In Q3 2009 most Western European countries returned to economic growth after the large economies, Germany and France, had already grown slightly in Q2. Year-on-year, the economic decline still remained high at c.4%. The economic recovery, especially in Spain, United Kingdom and Italy, which were particularly afflicted by the economic crisis, is progressing very slowly. Also in Q3, the retail sector continued to decline in most countries, whereby several countries, including France and United Kingdom, showed moderate growth compared to Q2. Rising unemployment thereby impaired retailing. In August, the unemployment rate in the Eurozone reached its highest level in ten years, namely 9.8%. Compared to the c.20% decrease in Eurozone industrial output, the decline in the retail sector of around 4% was still moderate.

Economic recovery in Eastern Europe is very sluggish. However, the speed of the currency devaluation has lessened. The capital exodus, as well as the declining demand for exports to Western Europe, continue to adversely affect these countries' economies considerably. However, the effect on the Eastern European countries differs greatly. Especially Poland continued its robust development and is expected to be the only European country reporting slight economic growth in 2009. Retail in Eastern Europe too was unable to decouple itself from the economic development and has so far reported, to some extent, significant declines during the course of the year following double-digit growth rates last year. Conversely, Poland, Russia and Turkey report still increasing nominal retail sales figures, albeit with a negative tendency (with the exception of Poland).

The Asian economies, in which METRO Group is present, excepting Japan, showed an above-average development in a global comparison and reported considerable economic growth also during crisis-afflicted 2009. China's economy, for example, grew by almost 9% in Q3 and also India was less affected by the crisis due to the significance that domestic demand has for its economic development.

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