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Operating Environment in 2007
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Operating Environment in 2007
The global economy grew strongly in 2007 for the fourth year, albeit not quite as fast as in the preceding years. From the second half, global business conditions were increasingly affected by the turbulence on the mortgage markets. Even though the financial crisis has not yet had a significant negative impact on the global economy, the risks to future economic development have since increased considerably. The emerging markets proved relatively resistant to the financial crisis. While the economy in Europe remained stable, the United States economy slowed noticeably over the course of the year due mainly to the domestic real estate and financial crisis. There was uncertainty in the euro zone as the euro continued to appreciate against the U.S. dollar. International trade remained robust thanks to strong demand from the emerging markets.
The markets relevant to our HealthCare business posted stable growth in the mid single digits in 2007, with the regional shift registered in prior years largely continuing. There was increasing growth in the emerging markets as health care services there became accessible to more and more people and the demand for treatment options for chronic diseases increased. By contrast, there were signs of slower growth in the United States and the major European countries, partly on account of declining treatment costs in areas where leading products have lost their patent protection and generics continue to gain market share. In addition, growth in western Europe in particular was hampered by health policy factors that led to stronger cost control and limited access to certain types of treatment. Following the biannual price reduction carried out in the previous year, the Japanese market grew once again in 2007, though at a below-average rate.
The global seed and crop protection market benefited in 2007 from more favorable weather patterns than in the previous year and from positive conditions on the world’s agricultural markets. Significantly higher demand for food, energy and feed plants, coupled with declining inventories, led to higher prices and spurred both crop production and the related demand for crop protection products throughout the world. The Latin American and eastern European markets posted double-digit growth rates, and the crop protection market in western Europe also recovered despite adverse climatic conditions in some areas.
By contrast, the markets of North America and Asia expanded only slightly, with the trend varying from region to region. The upward trend in China and India was maintained, while the drought conditions that have prevailed for several years in Australia persisted and the Japanese market continued to shrink.
The trend in the sectors of greatest importance to our MaterialScience subgroup varied by region in 2007 but was positive overall.
The automotive industry registered moderate expansion overall, with considerable regional variations. Whereas growth was slow in western Europe, eastern Europe closed out the year with a double-digit increase in production. China and India were the growth drivers in Asia, but production stagnated in Japan. The big three U.S. automakers remained under strong pressure, while Asian and German producers continued to strengthen their positions.
Capital spending in the construction industry rose only slightly worldwide in 2007 as a result of the negative trend in the United States, where the mortgage crisis led to a double-digit decline in housing construction. The pace of growth in western Europe was modest, with a shift from new construction to renovation. In the other regions, the positive trend continued. Although the Japanese construction industry shrank again in 2007 following a brief upswing, growth in Asia as a whole was above the global average.
The electrical and electronics sector saw satisfactory growth worldwide, led by Asia and Europe. Strong global demand was registered in all major product segments. Steady expansion in western Europe was accompanied by double-digit growth in eastern Europe. In the United States, the effects of the home construction crisis left its mark on the electrical sector, too. The industry’s performance in Japan was below the regional average, with strong growth being recorded in China, South Korea and India.
The furniture industry had a largely satisfactory year worldwide. The western European manufacturers enjoyed steady export sales despite the strength of the euro, while in eastern Europe the sector continued its recovery. In the United States, the real-estate crisis led to a significant decline in sales in the second half of the year. In Asia, China further reinforced its dominant position.
The markets relevant to our HealthCare business posted stable growth in the mid single digits in 2007, with the regional shift registered in prior years largely continuing. There was increasing growth in the emerging markets as health care services there became accessible to more and more people and the demand for treatment options for chronic diseases increased. By contrast, there were signs of slower growth in the United States and the major European countries, partly on account of declining treatment costs in areas where leading products have lost their patent protection and generics continue to gain market share. In addition, growth in western Europe in particular was hampered by health policy factors that led to stronger cost control and limited access to certain types of treatment. Following the biannual price reduction carried out in the previous year, the Japanese market grew once again in 2007, though at a below-average rate.
The global seed and crop protection market benefited in 2007 from more favorable weather patterns than in the previous year and from positive conditions on the world’s agricultural markets. Significantly higher demand for food, energy and feed plants, coupled with declining inventories, led to higher prices and spurred both crop production and the related demand for crop protection products throughout the world. The Latin American and eastern European markets posted double-digit growth rates, and the crop protection market in western Europe also recovered despite adverse climatic conditions in some areas.
By contrast, the markets of North America and Asia expanded only slightly, with the trend varying from region to region. The upward trend in China and India was maintained, while the drought conditions that have prevailed for several years in Australia persisted and the Japanese market continued to shrink.
The trend in the sectors of greatest importance to our MaterialScience subgroup varied by region in 2007 but was positive overall.
The automotive industry registered moderate expansion overall, with considerable regional variations. Whereas growth was slow in western Europe, eastern Europe closed out the year with a double-digit increase in production. China and India were the growth drivers in Asia, but production stagnated in Japan. The big three U.S. automakers remained under strong pressure, while Asian and German producers continued to strengthen their positions.
Capital spending in the construction industry rose only slightly worldwide in 2007 as a result of the negative trend in the United States, where the mortgage crisis led to a double-digit decline in housing construction. The pace of growth in western Europe was modest, with a shift from new construction to renovation. In the other regions, the positive trend continued. Although the Japanese construction industry shrank again in 2007 following a brief upswing, growth in Asia as a whole was above the global average.
The electrical and electronics sector saw satisfactory growth worldwide, led by Asia and Europe. Strong global demand was registered in all major product segments. Steady expansion in western Europe was accompanied by double-digit growth in eastern Europe. In the United States, the effects of the home construction crisis left its mark on the electrical sector, too. The industry’s performance in Japan was below the regional average, with strong growth being recorded in China, South Korea and India.
The furniture industry had a largely satisfactory year worldwide. The western European manufacturers enjoyed steady export sales despite the strength of the euro, while in eastern Europe the sector continued its recovery. In the United States, the real-estate crisis led to a significant decline in sales in the second half of the year. In Asia, China further reinforced its dominant position.
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