A business can never know too much and the old saying "knowledge is power" is no less true for being so familiar, and above all it is true in business.
This knowledge is particularly essential for companies that are about to start exporting to new territories or to more volatile parts of the world. But even when trading within the UK or with western Europe and North America, background knowledge of current and forthcoming conditions should inform every business decision.
The best decisions are the best informed ones, based on detailed and up-to-the-minute data, expertly analysed. When companies know where the risks and opportunities lie, they can trade with confidence, make the most of opportunities and avoid costly mistakes. But where should you source this information from?
Sourcing business information
One of the most reliable sources of business intelligence is too often ignored or neglected: the credit insurance industry.
Insurers such as Coface are in the business of knowing how individual companies, regions, countries and industrial sectors are performing at any given moment. They have teams of experts tracking individual companies, analysing economic movements, anticipating political changes and spotting business trends.
They use this information to assess the risks they underwrite. But they also make the data, and their conclusions from it, available to their policy holders. In fact for a leading credit insurance company such as Coface, providing business intelligence is as much a part of their service to clients as covering them against bad debt and delayed payment.
Coface country risk assessments
· The latest Coface Country Risk Barometer study – published beginning of Q2 2019 – is an example of the quantity and quality of analysis available. The headline conclusions on global economic trends are a slowing global economy, companies less confident than they were the year before and consequently investing more cautiously. Moreover, global trade show signs of fatigue, with the 3% increase of 2018 slipping to 2.3% in 2019.
Additionally, productivity across the globe heading downwards with the world GDP set to increase by just 2.9% in 2019, 0.3% lower than 2018. This is the lowest level of growth since 2016, the last year in which the three leading economies – USA, Eurozone and China – all slowed down.
The final conclusion was that in 2019 insolvencies are set to increase in 26 of the 39 countries for which data is available. This figure was just 19 the previous year. A 3% increase is expected in Western Europe, with 4% more insolvencies anticipated in Central and Eastern Europe.
Sector by sector
The Coface Barometer also looks at individual industrial sectors and the findings confirm the downward trend in the global economy. In the most recent Coface sector report, 14 sector assessments have been downgraded and no less than six of them refer to a single sector: chemicals.
The chemicals sector is particularly vulnerable in western Europe and the USA because of reduced sales opportunities in the automotive and construction sectors. As a result of all these factors, Coface has downgraded the chemicals sector to medium risk in the US, Germany and the Netherlands and to medium-to-high risk in France, the UK and Italy.
The automotive sector is also affected. After eight years of consistent growth, Coface reports that it is now showing signs of slowing. Low investment, increased competition, rising oil and ethane prices, changing consumer lifestyles and the necessity to adapt to new anti-pollution environmental standards all play their parts. Equally influential is the slow down in the Chinese market as it reaches maturity. Signs of growing protectionism around the world are also noted as likely to have a dampening effect on automobile sales.
Searching for positive signs? Look east
The five sector assessment upgrades made by Coface all focus on one global region: the Middle East. One of the biggest influences on the positive direction for Gulf Cooperation Council countries is the US Federal Reserve’s change of monetary policy. All their currencies are aligned with the US dollar.
· The Middle East is also experiencing improved trade in other sectors. Three sectors in the UAE are now promoted into the medium risk category. They are the automotive industry which is stimulated by the wealth many infrastructure projects will bring; the retail sector which is driven by stronger growth, investment and tourism. The last one is the textiles and clothing sector that is benefiting from the population's increased purchasing power and changing consumer behaviour.
Luxury goods are bucking the downward trend
According to a special Coface report published in May 2019, luxury goods are one of world trade's major growth areas. The world luxury goods market grew by 5%. The main driver for this remarkable growth is China's burgeoning middle class. In fact China's consumers now account for 33% of all global purchases of luxury goods, this is expected to rise to 46%.
The opportunity is clear, but there's also the danger of being too dependent on one market. If the Chinese middle classes start to feel the pinch, the luxury goods sector may regret having all its 'Fabergé' eggs in one basket.
The content of the Coface Barometer and other Coface reports show how much detailed data and penetrating analysis is available to businesses - enabling them to make informed trading decisions.
However, by the time you read this, some of that data and analysis may have been superseded by the "unknown unknowns": the black swan events that could never have been foreseen. That's why businesses need business intelligence that is not only detailed and expertly analysed, but also constantly updated.
This article was brought to you by Coface
– a world leading credit insurer