The following developments are the main elements of the management report mentioned in article L. 451-1-2 of the French Monetary and Financial Code and in article 222-3 of the General Regulation of the AMF which must include the information mentioned in articles L. 225-100, L. 225-100-2, L. 225-100-3 and in the second paragraph of article L. 225-211 of the French Commercial Code. Other information corresponding to required elements of the management report is to be found in Section 10.7 “Cross-reference table for the management report”. The following discussion should be read in conjunction with the consolidated financial statements and related notes. They contain information concerning the Group’s future objectives which imply risks and uncertainties, including, in particular, those described in Chapter 2 “Risks and risk management”.
Global economic growth eased slightly to +3.2% in 2019 according to the FactSet consensus of economists, 0.3 basis points shy of the 2018 level (+3.5%). However the picture remains very mixed: American growth remained the highest of the developed countries (+2.3%, down from the +2.9% recorded in 2018) thanks to the virtuous circle of consumption – employment – growth and accommodative monetary policy, despite the end of the favorable impact of tax cuts. Japan saw further weak growth (+0.9% in 2019, vs. +0.8% in 2018). The euro zone slowed further: +1.2% in 2019, following +1.9% in 2018. The British economy has stabilized at a low level (+1.3% in 2019, following +1.4% in 2018). Growth in the Chinese economy slowed by a further 0.4 basis points to +6.1% in 2019, following +6.5% in 2018 and +6.9% in 2017. The more conservative policy in the US and uncertainty surrounding Brexit were once again major political factors influencing economic trends. U-turns in US and European monetary policies also played a significant and positive role, particularly in the fourth quarter.
The oil price trended up following a sharp fall in the fourth quarter of 2018. Sovereign interest rates fell until the month of August but have recovered somewhat since. In the United States, economic growth eased to +2.3% in 2019, following +2.9% in 2018. This small cyclical deterioration is attributable to the end of the very favorable impact of the Trump administration’s 2017 tax cuts, plus the effects of trade spats with the country’s main trading partners. Across the Atlantic, the economy is still in a virtuous cycle of consumption – employment – growth. Job creation, although down on 2018, have remained high (1,977,000 over the year) and have enabled the unemployment rate to remain very low.
The monetary policy of the Central Bank, which dropped its key rates in 2019 compared with 2018, helped to limit the extent of the economic downturn. Growth slowed further to +1.2% in the euro zone, after +1.9% in 2018, according to the European Commission. 2017 saw the top of the cycle. The slowdown in global trade, international trade tensions and uncertainty surrounding Brexit took a heavy toll on the German economy, with GDP set to grow by just +0.5% in 2019. The German industry is very close to recession, owing to difficulties in the automotive sector in particular. There were stark contrasts between countries within the zone: while France posted growth of +1.3%, Italy was on the edge of recession, with token growth of +0.2%, going by FactSet consensus estimates. Headline inflation has eased significantly: it is expected to be limited to +1.3%, vs. +1.8% in 2018, according to the European Commission.
In the United Kingdom, economic growth has stabilized at a low level. British GDP increased by +1.3% in 2019, virtually the same pace as in 2018 (+1.4%). The difficult Brexit negotiations continued to undermine business investment and household consumption. Inflation (+1.8%) reduced consumer purchasing power, but was down slightly on the previous year (2.5%).
The Japanese economy continued to experience sluggish growth: GDP grew by +0.9% in 2019, after growth of just +0.8% in 2018 according to the IMF. As in 2019, the downturn in international trade and the strength of the yen’s external exchange rate affected Japanese exports, which fell in absolute terms.
In China, the rate of growth of the economy is slowly and steadily declining. The economy was set to grow by 6.1 % in 2019, after 6.5% in 2018 and 6.9% in 2017. The authorities have succeeded in managing this economic downturn through proactive measures to support business.
Tensions with the USA have had a significant impact on exports. Oil prices trended up moderately throughout 2019. As such, it offset the significant fall in late 2018. The stepping up of US production of oil and shale gas is less aggressive, whilst the global economic downturn has limited increases in demand. Geopolitical parameters continue to influence short-term price trends. When reviewing its forecasts in December 2019, Zenith maintained its estimate of relatively sustained growth of +4.2% in advertising media investments in 2019. By geography, North America is set to see growth of +5.4%, after growth of roughly 8% per annum in 2017 and 2018. Advertising expenditure is being driven mainly by countless small and medium-sized businesses that use Facebook and Google for their first ads to launch their brand.
