2.2 Economic Environment
In 2010 the global economy recovered from the deep recession more quickly than expected, with economic output well ahead of the previous year. After rapid expansion in the first half, the pace of growth slowed in the second half. This was mainly due to the expiration of economic stimulus programs along with increased efforts by consumers and the public sector in a number of industrialized countries to bring high debt levels under control. Unemployment also remained persistently high in many countries. As before, the economy was held back by the effects of the financial crisis, which still have not been fully overcome, though in many countries the economy continued to be buoyed by expansionary fiscal and monetary policies.
Economic development showed wide regional variations in 2010, with growth rates declining in nearly all regions in the final months of the year. The emerging markets of Asia and Latin America expanded fairly rapidly and remained key drivers of the economic recovery. The industrialized countries also recovered distinctly compared to 2009, although some of them continued to feel the impact of the economic and financial crisis in 2010. In the United States and Japan, the increase in growth rates already slowed in the spring of 2010. However, production growth in the European Union did not fall back until the second half of the year. Moderate growth was still achieved in the European Union as a whole thanks to the robust expansion in Germany.
In 2010 the market for prescription medicines posted growth in the mid-single digits. Expansion slowed in the United States and the major European countries, partly as a consequence of more restrictive health care policies. These are leading to stricter cost controls, limiting access to certain types of treatment and also resulting in mandatory rebates in some cases. Growth continued in the emerging countries, where health services are becoming available to more and more people and prescription medicines are therefore in greater demand.
The global consumer care market grew somewhat more slowly than in the previous year, mainly as a result of the weak flu season in Europe and North America and despite keen demand for consumer care products in China and India. Despite a good performance in Latin America and Asia, the diabetes care market did not achieve tangible overall growth because of strong pressure on prices in the United States. The animal health market regained its average long-term trend, with growth in the mid-single digits.
Developments in the global seed and crop protection market varied widely in 2010. While farmers’ overall demand for high-quality seed continued to rise significantly, the global crop protection market registered only very modest growth.
The relatively long winter combined with a wet spring in many regions reduced demand for crop protection products in North America and Europe, especially in the first half of the year. As the economy recovered, business conditions for farmers also improved from mid-year onward. Higher demand, coupled with weather-related harvest shortfalls in Russia and central Asia, for example, led to an increase in producer prices for the major agricultural crops. These effects came too late to compensate for the declining market trend in the northern hemisphere, but in time to spur the use of crop protection products at the start of the main growing season in Latin America. The liquidity bottlenecks at many farms in that region caused by the financial crisis also eased markedly. The market in Asia/Pacific as a whole stagnated in 2010, with trends varying in different parts of the region. While the market contracted in Japan and held steady in China, mainly due to adverse weather, the crop protection market benefited from favorable monsoon conditions in India and from the recovery in the agriculture industry in Australia after years of drought.
The customer industries relevant to MaterialScience recovered in 2010 from the sharp drop in sales in the previous year. Despite a slight cooling of the economy in the second half of 2010, global demand remained stable.
In 2010 the automotive industry overcame the previous year’s slump in sales faster than expected. Business with new cars trended particularly well in the Asian markets and in Russia. In the United States, too, volumes again rose significantly. In western Europe, demand for cars was down as expected compared to the incentive-driven prior-year figures, although even here the rate of decline appeared to be slowing.
Following the shrinkage in the electrical/electronics market in the prior crisis year, rapid growth was again registered in 2010. While the industrialized countries benefited from regional stimulus programs in areas such as infrastructure and e-mobility, the strong growth in the emerging markets continued due to rising demand for electronic consumer goods.
The global construction industry stagnated in 2010, with varying regional trends. While the sector continued to shrink in western Europe, the United States and Japan, it posted robust growth in the emerging markets, particularly China, India and Brazil.
The business situation in the furniture industry brightened increasingly over the course of 2010, though the pace of recovery varied substantially from one region to another. While production showed only a modest increase in North America and some western European countries on account of weak demand, the Asian furniture industry benefited from robust demand in China and a gradual recovery in global demand for affordable furniture.