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2014 Industries Summary

Core Content

This report from The Economist Intelligence Unit provides an analysis of key industries in 2014, including Automotive, Consumer Goods/Retail, Energy, Financial Services, Healthcare, and Telecoms. It also includes insights from a survey of 647 executives conducted in November 2013, offering a glimpse into business expectations and investment trends for the year ahead.

Main Predictions and Trends

Automotive

• Europe's Recovery: The automotive sector is expected to see a return to growth in the EU, ending a five-year slump. This will be driven by improved economic conditions and the end of the recession.
• Global Market Shift: Asia is projected to account for 43% of the global car market in 2014, up from less than 30% in 2008. Europe's share is expected to drop from 26% in 2009 to less than 17% by 2014, reflecting a shift in production capacity.
• Overcapacity and Competition: Overcapacity remains a concern, especially in China and other emerging markets, where new plants were built during previous booms. This may lead to increased competition and pressure on margins.
• Emerging Technologies: Self-driving cars and hydrogen fuel cells are gaining traction. Hyundai and Toyota are set to launch hydrogen fuel cell vehicles, and some Mercedes models will offer hands-free driving at low speeds.
• Market Restrictions: Some cities, including in China and Indonesia, may introduce car ownership restrictions to combat pollution.

Consumer Goods/Retail

• Transition and Growth: Retail and consumer goods firms are navigating a transition as they adapt to changing consumer behavior and market dynamics. Cautious optimism is expected, with global retail growth anticipated to stabilize.
• China and India: These markets are critical for global growth, but uncertainty remains. China's retail sales are forecast to grow by 9%, driven by e-commerce and demand from emerging cities. India's retail sector is still dominated by uncertainty due to FDI legislation and political factors.
• E-commerce and M-commerce: E-commerce is becoming mainstream, and mobile devices will play a strategic role in retail. Retailers are investing in data and service standards to compete across multiple channels.
• Trends for 2014:
  1. Data Utilization: Retailers will leverage data to improve customer experience and optimize inventory.
  2. Enhanced Shopping Experience: Traditional retailers will focus on creating immersive experiences to attract customers.
  3. Improved Service: Online and physical retailers will both seek to enhance customer service, with social media and mentoring programs playing a role.
  4. Delivery Innovation: Delivery speed and efficiency will be a key battleground, with companies like Amazon and eBay investing in new technologies.
  5. Ethical Branding: Ethical and sustainability concerns are becoming more prominent in consumer decision-making.

Energy

• Uneven Expansion: Energy markets are expected to experience varied growth, with oil and gas sectors showing strong expansion, while renewable energy is on an upward trajectory.
• Oil and Gas Growth: Oil production will continue to rise, driven by high prices and growing demand in emerging markets. The US is set to overtake Russia as the top hydrocarbon producer due to the shale boom.
• LNG Development: The US and Australia are expected to expand their liquefied natural gas (LNG) exports, with Australia leading the charge against Qatar's dominance. The Keystone XL pipeline decision and Arctic drilling plans by Royal Dutch Shell are key developments.
• Renewables: Despite challenges, renewable energy is growing rapidly, with solar and wind power gaining traction, though integration remains a hurdle in countries like China and India.

Financial Services

• Basel III Impact: Higher bank capital requirements have had a negative impact, particularly in Europe, where corporate lending has been constrained, potentially prolonging the recession.
• Confidence and Risks: While confidence in financial services is positive, concerns remain over political and economic stability, especially in the US and Europe.

Healthcare

• Global Shifts: The healthcare industry is expected to see continued challenges, particularly in Europe, where governments and insurance funds struggle with deficits and aging populations.
• Emerging Markets: The US is seen as a more promising market for healthcare growth, while China and India are still in early stages of development.

Telecoms

• Renewed Confidence: The telecoms sector is expected to benefit from increased investment and growth, especially in developing markets.
• Chinese Dominance: Chinese telecoms companies are likely to dominate the market, but may face increasing regulatory hurdles as environmental standards improve.

Key Survey Insights

• Business Conditions: Most respondents (63.1%) expect their company to expand more in 2014 than in 2013. Over 88% believe global competition will intensify.
• Growth Prospects: 67.4% of respondents believe that developing/emerging markets offer stronger growth prospects than developed ones.
• Regional Sentiment:
  • Asia: Expected to remain a key growth region.
  • Europe: Mixed sentiment, with 65% of respondents expecting their company to perform better, but uncertainty about the broader economy.
  • US: Seen as a more stable market, though political stalemate remains a concern.
• China Concerns: 67.5% of respondents believe reliance on China could hamper growth if the economy slows.

Other Key Points

• Global Overcapacity: The automotive and consumer goods sectors face overcapacity issues, especially in China and other emerging markets.
• Political and Regulatory Risks: These are a major concern in many regions, particularly in the Middle East and developing markets.
• Opportunities in Developing Markets: Despite the challenges, many developing markets are expected to offer growth opportunities for both local and foreign investors.

Summary of Survey Results

Conclusion

2014 is expected to be a year of mixed results across industries. Europe is on the path to recovery, while emerging markets face moderating growth and overcapacity challenges. The US is likely to be a major player in the energy and automotive sectors, and the global shift toward digital and mobile technologies is expected to reshape retail and consumer goods strategies. Despite the challenges, there are still growth opportunities in both developed and emerging markets.