UPS market heads for slowdown

February 28, 2012 // Paul Buckley

Recent quarterly tracker results of the global UPS market reported by market analyst, IMS Research indicate that year-over-year growth slowed to 5% in Q4 2011 following three consecutive quarters of double digit growth. As part of its ongoing UPS market analysis, IMS Research shows 2011 revenues roughly in line with what was forecast.

The year started out relatively strongly, ending with a nearly 12 point gain year-to-date over 2010. However, fourth quarter’s sales slumped and this is a trend likely to continue rather than be just a seasonal slowdown in the market.

America’s UPS sales performed as projected in 2011, with mid-range and large UPS sales growing faster than single-phase UPS. 2012 growth rates for the region are forecast to be soft, as North America’s economy is still a risk despite recent more upbeat news. Strained budgets and uncertain future investments are consequences of the US’s financial woes. While Latin America’s market is projected to show double-digit growth, the market size is only a quarter of that of the US.

Europe, the Middle East, and Africa (EMEA) also saw faster growing sales in the mid-range to large UPS after being flat in 2010, though favorable currency exchange helped the situation to some extent. Unfortunately, EMEA’s signs of improvement appear to be short-lived, as problems with economic stability continue and the region slides back into recession.

IMS Research market analyst Lori Lewis explained: “Europe’s financial health has been very dependent on the outcome of the European debt crisis. Since there have been no resolutions to the problems and many countries are faced with credit rating downgrades, it is likely that EMEA’s  UPS market will contract slightly as a result.”

The Middle East and Africa both have potential for growth; yet continued political corruption and instability are deterrents that keep many investors away.

“Both of these regions have the resources to thrive and develop, but no one wants to take the financial risk in an already vulnerable global economy,” added Lewis.

While Asia’s growth rates outpaced the rest of the market by a convincing margin, the region has showed signs of slowing down, especially the single-phase segment. “The low growth in Asia’s fourth quarter is relative only to an extremely strong past two years in the region,” explained Lewis. “We knew Asia’s growth would decelerate a bit towards the end of the year, but we project that the region’s growth will continue to outperform the rest of the market over the next 3-5 years.”

As 2012 carries on, there are noticeably more signs of a market slowdown. Additionally, the IMF’s most recent GDP forecasts were recently downgraded due to sustained concerns in the US, the European Union, the Middle East, and Africa. IMS Research suggests if these are any indication as to how the UPS market will perform in 2012, it is in for a bumpy ride.

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