Despite considerable turmoil in financial markets during the first half of this year, a war in the Middle East, volatile oil prices, and a temporary slowdown in U.S. economic growth, the global economy remains in solid shape. Against this backdrop, Global Insight projects world industry activity will increase 4.5% in 2006 and 3.5% in 2007.

Led by China, Asia Pacific excluding Japan continues to have the most robust industrial performance as a region, followed by Emerging Europe, North Africa, and Latin America and Caribbean. Industrial growth in North America remains solid, albeit below the world’s average, while growth in Japan and the Eurozone is rather modest. The following is Global Insight’s top-12 industry picks for 2006 and 2007.

Office and Computing Machinery ranks first, with growth of 14% and 12% in 2006 and 2007, respectively, supported by hefty volume increases worldwide. Consumers and companies alike continue to replace their computers at a rapid clip, taking advantage of state-of-the-art technology and declining prices. Companies must regularly invest in IT infrastructure to keep their productivity high, control their costs, and remain competitive. With the global economy on a steady growth path for the last few years, consumers have increased their purchasing power, which has enabled them to boost their spending on discretionary items. The outlook for this industry remains bright.

Aircraft manufacturing, which scored ninth in 2005, has moved up to second place this year, following a prolonged period of weakness in the early 2000s. Orders for new commercial aircraft have rebounded very strongly in the last two years, particularly those from Asia—a virtual guarantee that aircraft production will remain robust for the foreseeable future. Commercial Research & Development takes the second spot in 2007. Continued industrial growth, healthy corporate profits, aggressive manufacturing capacity expansion programs in Asia and the Middle East, and a generally keen competitive environment are all key contributors to this industry’s notable performance. Metal & Woodworking Machinery is ranked third in 2006, with support from record construction activity and a roaring equipment market. Shipbuilding & Repair is also enjoying a big comeback, ranked fourth this year and third next year, following the 2004 supply bottlenecks that plagued the ocean-going shipping industry worldwide. This industry is receiving an extra jolt from ship operators, who are replacing the older units in their fleets to meet stringent global environmental regulations.

Another industry that is strongly benefiting from the construction boom is Electrical Apparatus & Supplies, ranked fifth in 2006 and fourth in 2007. Radio, Television, & Communications Equipment is in fifth place in 2007. Generally lower prices for televisions, in particular HD-capable flat-screen monitors, and music-playing equipment have made those products more affordable to the consumer, leading to increased global sales. In addition, the use of cell phones continues to spread fast in industrialized and developing countries alike. Asia currently accounts for an estimated 55% of global production of communications equipment, and is largely responsible for the robust growth in this sector’s output.

Growth for our second-tier top-ranked industries—those rated 6th to 12th—is projected to hit 5-7% in 2006 and 5-6% in 2007. Topping this list in 2006 and 2007, respectively, are Computers and Related Activities & Financial Institutions. Software and technical support continue to be driven by the outstanding growth in computer equipment, with a notable increase in outsourcing in the last few years to IT firms in India, other parts of Asia, and central Europe, all of which offer comparatively lower IT consulting costs. Growth in Financial Institutions is spurred by the healthy gains in commercial and consumer purchases, including both corporate and private investments, and the need to finance many of those activities. Synthetic Resins ranks seventh in 2007, fueled by large increases in production in Asia and the Middle East as a slew of new plants scheduled to hit the market in 2007-10 begin to come on-stream in those two regions. Non-Energy Mining is eighth in 2006, as healthy demand for manufactured goods and record or near-record price levels for metals, construction materials, chemicals, and other basic commodities have caused mining activity to soar. But, with commodity prices at or near their peaks this year, we see growth in mining activity easing in 2007. The remaining industries in our second-tier, top-ranked list all benefit from a combination of rising disposable income and a striving consumer market in China, India, Emerging Europe, and the other fast-developing countries and regions.

Coming from the economic slowdown of 2001–02, the world’s fastest-growing industries were almost exclusively manufacturing and mining based—post-recession economic rebounds tend to be, on average, less pronounced for services than for goods-producing industries. But, this began to change in 2005 as the recovery gradually matured. For 2007, Global Insight now projects that four of the world’s fastest-growing industries will be from the service sector.

Frantz Price