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Industrial outlook

Nicolas Martin / ag, gswAugust 21, 2012

Business prospects for 2012 are bad. It's not just Europe that's in crisis. Emerging economies are also slowing down. But there are a number of sectors and countries able to flourish, despite these conditions.

Die aufgehende Sonne taucht am 7.12.2001 das Bayer-Werk in Leverkusen mit seinen Schornsteinen in ein rötliches Licht. Bei trockenem und kaltem Wetter soll am Wochenende wieder die Sonne strahlen, die Temperaturen fallen auf null bis fünf Grad.
Image: picture-alliance/dpa

The bad news first: Analysts don't know which industry branch is going to flourish. They say everything is much too interconnected, and the global economy's course remains too much of an uncertainty.

But in times of crisis, there is a rule of thumb: Asking how much a branch depends on a given economic cycle. The reasoning is simple: The more a branch depends on consumer spending, the harder the blow of a crisis is. After all, people like to have some money in their pockets before buying an expensive car.

And yet there are branches within industry that can make it through a crisis practically unharmed - at least in theory: "Globally, the demand for energy is only experiencing minor ups and down during the economic cycles, as it is subject to a strong base load," said Ferdinand Fichtner of the German Institute for Economic Research (DIW) in Berlin. That means energy providers can expect stable demand - as can companies that deliver consumer goods for everyday life, such as food or medical services.

"Demand for these products does not depend on a person's income or the current business cycle - demand for them will always be there. This is an underlying principle of a functional national economy," Fichtner said.

No one unscathed

Branches that require high sums of investment, such as the machine building industry, are bound to suffer when the economy is weakening; in times of uncertainty, businesses are reluctant to make large investments. But there are exceptions - such as the airplane industry, said Michael Braeuniger of the Hamburg-based Institute of National Economics (HWWI): "Here we are dealing with very long delivery times and planning that reaches very far into the future. In the airplane industry, the orders are placed over the course of years, making it all very much independent from any economic cycles."

Michael Bräuniger photo & copyright: Sabine Vielmo, Hamburg
Bräuniger: Airline industry skirts some effects of the crisisImage: HWWI/Sabine Vielmo
***Achtung: Nur zur mit dem DIW abgesprochenen Berichterstattung verwenden!*** Ferdinand Fichtner vom Deutschen Institut für Wirtschaftsforschung (DIW) *** eingestellt im August 2012
Fichtner: Energy and everyday goods less affected by the crisisImage: DIW

But should a crisis last longer, all businesses eventually have to face losses. To bridge the gaps within the demand from certain countries, these export-oriented industries are always on the lookout for new markets to sell their goods. According to Braeuniger the US and Europe are still the key markets, "but their dynamics are far behind those of the emerging economies. Those grow very rapidly and are therefore gaining importance."

Eyes on emerging economies

China, India, Russia and Brazil remain the beacons of hope for exporting economies. The "Germany Trade & Invest" corporation (GTAI), a government agency that supports the export business, has analyzed the prospects for Germany within eight industrial sectors. In China, Russia and Brazil, the study suggests there are good prospects in every branch. But in India, researchers see just average possibilities for the machine building, chemical and automotive industries.

It has been the case for a while now that exporters are looking beyond the emerging market nations. Ferdinand Fichtner points to examples like Southeast Asian countries such as Thailand or Indonesia.

"There's also really a need to catch up in Africa, although I would still be very cautious in terms of growth there for the next ten years," said Fichtner.

Motors for growth

The GTAI study says that the upheaval in northern Africa and the Middle East have opened doors. In Tunisia, economic growth of around 2.8 percent is expected in 2012, with energy technology especially in demand. Some European countries are feeling the effects, as well. Turkey is expected to grow by three percent, well above the European average. In Germany, industrial builders, machine builders and the chemical industry stand to benefit.

The winners of the new market conditions are largely tucked away in countries like Indonesia, where there is a very large population that can look back at six percent growth last year. Mexico, Latin America's second biggest economy, is becoming more and more interesting for exporters in the area of renewable energies. And the study suggests Mongolia offers untapped possibilities. The country has many natural resources, and mining equipment, materials handling technology and construction vehicles could all be in demand. That spells good news for certain German industries - and all in spite of the crisis.

Fishermen in a traditional boat in front of Komodo National Park, Indonesia EPA/OLIVIER MATTHYS
Indonesia is home to around 240 million people - an enormous marketImage: picture-alliance/dpa