North America and Europe will drive revenue growth for industrials as global trends remain weak. Exports could continue to be a drag as currency pressures U.S. producers to an extent. Europe is improving as a weak euro and fiscal stimulus aid demand. China weakness may persist due to slower growth and overcapacity.
Producers are shifting low-value manufacturing to India and Southeast Asia, where labor costs are lower. Wealthier consumers in China will demand more high-value products, prompting manufacturers to use more cutting-edge production systems.
M&A and investor activism may continue to drive change, as many companies are willing to pursue deals and have the balance-sheet capacity to finance them. Activist pressure may prompt companies with weak stock performance to make portfolio changes — especially industrials underperforming over one- and three-year periods.
Commodity-related markets including energy and mining will remain weak, while aerospace and autos are likely areas of growth. Higher production and growth in spare parts will aid aerospace markets.
Persistently weak oil prices continue to blight the global industrial sector. More specifically, oil producers’ spending cuts have hit hard in industries that rely on that spending.