Economic developments

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We estimate that in 2014 the world economy grew by 3.0%, thus matching the rate of expansion witnessed in 2013. In comparison, the average global growth rate over the past half century was 3.6%. Over the year as a whole, emerging markets and the eurozone disappointed. The fall in commodity prices was the main cause of the sharply lower inflation rate around the world.

United States

The United States had a difficult start to the year, with the economy contracting by 2.1% year-on-year during the first quarter. Later, this contraction turned out to be due mainly to the extremely cold winter weather and a number of temporary negative factors. As the year progressed, economic activity picked up, reaching a provisional peak in the third quarter. During that quarter economic activity expanded by 5.0%, the fastest rate since 2003. Unemployment in the United States fell to an unexpectedly low level of 5.7%

Eurozone

The eurozone economy registered only very limited growth. France and Italy disappointed the most, but the German economy also failed to live up to expectations. The monetary policy pursued by the European Central Bank (ECB) surprisingly proved highly accommodating, while budget cuts in the eurozone were being scaled back.

Japan

The hike of the sales tax in April hurt the Japanese economy more than expected. Towards the end of the year, consumer confidence weakened considerably. Prime Minister Abe aimed for an early election in December, so as to get support for his plan to postpone a second VAT hike. His coalition won the election by a landslide.

Emerging markets

2014 was an election year for many large emerging countries. In India and Indonesia new government leaders took up office and hopes that they would pursue better economic policies arose. In China the rate of growth slowly weakened.

Inflation

The oil price plunging to almost half its original value and the fall in food prices were the main causes of the global slowdown of inflation in 2014. Later in the year, core inflation (price rises excluding volatile components such as food and energy) also weakened further. As general price levels continued to fall, the eurozone in effect slipped into a state of deflation. In Japan inflation accelerated, but not as much as the authorities would have liked. In the United States inflation remained above 1%, but below the US Federal Reserve’s (Fed) target of 2%.

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