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Get ready for a bumpy future

25 March, 2013

The European economy is falling deeper into recession as politicians debate banking regulations, budget policy, and structural changes to the EU. In 2012, Europe Industrial Production (our benchmark for the European economy) decreased by 2% from the previous year. Recessionary conditions will linger during the first half of this year, but we anticipate a stabilising economy during the latter stages of 2013 as the on-going budget and monetary reforms build confidence in businesses and consumers. Over the course of the next two years, we expect the European economy to improve at a mild 0.8% annually. Enhancing product quality and developing strong relationships with clients will be essential to grow your brand across Europe, especially as more mature markets become more competitive.

Financial markets are showing signs that 2013 will not be as bad as 2012 in Europe and the UK. Confidence is building in the European financial sector, with the FTSE-100 and Dax (German stock exchange) annual indexes rising above year-ago levels in early 2013 (see chart above). The rising stock exchanges signal that both businesses and investors are optimistic over the future course of the economy. In the bond market, falling government bond yields for Greece, Spain, Portugal, and Ireland indicate investors approve of the countries’ austerity and stability efforts. Declining bond yields show progress toward each country funding their own deficit spending. This is an important step for the EU and the European Central Bank (ECB) after issuing billions of euros to financially strapped countries in recent years.

The current economic climate is a good time for business leaders to gain a long-term perspective on markets and competitors. Developing new efficiencies and competitive advantages will help position companies for long-term growth as others in the industry struggle to adapt to higher borrowing costs and mild inflationary pressures. Embracing new technology and expanding sales channels will keep businesses at the forefront of the drives and controls market.

* ITR Economics International is a global authority on business cycle forecasting, with bases in the US and Europe. ITR claims to have a 94.7% accuracy rate for its forecasts. ITR’s CEO and president, Alan Beaulieu, is also chief forecaster for the European Power Transmission Distributors Association. Will Skebey is an economist with ITR.

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