In 2020, lockdown and quarantine measures taken by many countries in response to the global pandemic have had an impact on the agriculture industry. There were transport issues and a squeeze on the availability of foreign seasonal workers. Looking forward, agriculture industry trends include the tightening of environmental regulations (especially in Europe), growing risk of adverse weather conditions (these often hit emerging economies the hardest), and low sales prices due to pressure from processors and retailers.
After a 12% contraction in 2020, global automotive production is expected to grow by 15% in 2021. However, this rebound could be impaired by the current semiconductor shortage, which already led to lower growth in H1 of 2021. Currently it is expected that the shortage will gradually undwind, with production gaining momentum again in H2 of 2021, while sales will be driven by pent-up demand.
Many automotive businesses face the need for increased investment, in order to address the shift away from combustion engines in favour of e-mobility. The credit risk situation of many smaller tier 2 and tier 3 suppliers remains strained.
Chemicals / Pharmaceuticals industries
Global chemicals production has recovered quickly since H2 of 2020, and in 2021 output is expected to expand by about 6%, supported by robust demand in key end-use markets and the recovery in global trade.
Pharmaceuticals businesses continue to benefit from rising health expenses due to the pandemic. In the mid- and long-term, ageing populations in developed countries and growth in individuals’ affluence and access to healthcare in emerging economies are leading to rising healthcare spend.
Construction / Construction materials industries
Sector performance of the construction industry is highly cyclical and often varies from country to country. In many markets the sector is characterised by a high volume of smaller players and fierce competition, particularly at the lower end of the value chain. In general there is a higher level of insolvencies compared to other sectors and, with tight operating margins, there is an increased credit risk across the industry especially with smaller operators.
Global construction output is expected to increase by more than 6% in 2021 after a 4.5% contraction in 2020, driven by large fiscal stimulus measures. However, due to severe contractions seen last year, in many markets the performance outlook remains "Poor" for the time being, and a shortage of building materials has driven up prices for construction businesses.
Consumer durables industry
Digital transformation has posed a major challenge for the consumer durables sector even before the issues caused by the COVID-19 pandemic. Brick and mortar retailers, in particular, were struggling with increased competition from online sellers, high operating costs and decreased turnover. The stay at home orders and lockdowns during the pandemic have exacerbated the situation, resulting in an sharp increase in online sales and significant drop-off in sales from physical stores. The consumer durables industry forecast predicts an exodus of brick-and-mortar retailers from the market over the coming few years, especially among smaller players.
Electronics / ICT industry
The outlook for the electronics/ICT industry remains generally benign. Many ICT businesses have benefited from opportunities presented by the COVID-19 pandemic, e.g. the sharp increase in remote working and digital home schooling. Production increased by 4.6% in 2020, and in 2021 output is expected to grow by more than 12%, driven by a sharp demand for semiconductors.
However, ongoing US-China trade tensions may present problems, and the prospect of an ongoing US-China trade war over high-tech equipment remains a downside risk in the long-term.
Financial services industry
During the pandemic the financial services sector has proved to resilient in most countries. However, in some markets the downside risk of rising loan defaults still persists.
The food industry faces fierce competition and price wars in many food retail markets. This impacts producers and suppliers, who can struggle with tight margins and passing on costs. Food industry trends reveal a sector undergoing a period of change. Much of the industry, especially in developed economies, is affected by changes in consumer behaviour, with increasing numbers choosing healthy options.
Machines / Engineering industry
The machines/engineering sector is heavily dependent on the economic wellbeing of its key buyer industries, especially agriculture, construction and automotive. Deteriorated demand in 2020 has impacted on the machines/engineering sector performance. However, in many markets a rebound has started, and is set to continue in H2 of 2021.
Metals / Steel industries
After a severe contraction in 2020, global demand for steel and metals has increased again from key buyer industries like automotive and construction. In H1 of 2021 many steel and metals producers and wholesalers have benefited from higher sales prices due to ongoing supply shortages.
Paper producers and the packaging segment of the paper industry have been impacted by both COVID-19 lockdown measures and also the decline in demand from ongoing digitalisation. The latter is a trend that has been ongoing for years. Despite many consumers turning to online shopping, paper industry performance is expected to remain subdued in 2021, after a contraction in most markets in 2020.
The retail, hospitality and travel segments of the services industry have been hit particularly hard by COVID-19-related lockdowns and quarantine measures throughout the world. A drastic reduction in international travel has impacted airlines, airports, travel agencies and tour operators, as well as hotels, cultural events, fairs and exhibitions. In many countries, lockdown included the shutting of bars and restaurants. Government support packages for lost earnings vary between countries.
Currently a rebound is ongoing in many markets, driven by vaccination rollouts and the easing of lockdown measures. However, the credit risk of many service businesses remains high due to liquidity constraints.
Producers, wholesalers and retailers in the textiles industry were experiencing an economic squeeze from fierce competition and thin margins even before COVID-19 spread across the world. This is especially true for brick-and mortar-retailers suffering from rising online competition. In addition to these challenges, pandemic lockdowns caused physical stores to close in many countries, resulting in deteriorating sales figures for the textiles market.