Ten 2023 Business Trends and Industry Forecasts

Ten Business Trends for 2023, and Forecasts for Nine Industries

BY THE ECONOMIST Ten business trends for 2023

1 America’s Federal Reserve and other Western central banks raise interest rates still further to battle inflation. China, though, keeps monetary policy loose. 2 The inflation crisis hurts shoppers and retailers; even e-commerce growth slows. Online retail is 14% of all sales — up from 10% in 2019 but barely beating 2022.

3 Covid-19 takes many more lives, but deaths dip to less than double the number from flu. China may loosen its zero-covid policy, risking a surge in cases.

4 Asia’s appetite for energy helps push global oil demand up by 1.5%, to exceed pre-pandemic levels. opec grudgingly expands output, suppressing prices somewhat.

5 Recession risks and rate increases do not prevent tech spending rising by more than 6%. Device sales disappoint, but the artificial-intelligence market swells to $500bn.

6 As they struggle to sign up new subscribers and take on competitors, streaming firms continue to invest heavily in content — $17bn, in Netflix’s case.

7 Global sales of new cars grow by just 1%, but those of electric vehicles increase by 25% as China reverses plans to scrap tax breaks to maintain demand.

8 America, the world’s biggest defense spender, boosts annual outlays to $800bn — more than three times China’s level. But budgets, adjusted for inflation, shrink. retreat. This provides little relief to companies hampered by flagging production of some metals — or to 800m hungry people.

10 Air travel turns profitable as international arrivals soar by 30%. But they stay below pre-pandemic levels; many would-be business travelers opt to meet remotely instead

Business environment

The war in Ukraine and the pandemic will drag on. Pricey commodities will help producers but worsen food insecurity and hurt many economies. Although global GDP growth will slow to 1.6% in 2023 from 2.8% in 2022, inflation will be a still-sizzling 6%, forcing central banks to raise interest rates further. China, though, will keep rates low — and may ease its zero-covid policy, boosting world trade.

Automotive

After three sputtering years, carmakers will stay in the slow lane in 2023. Newcar sales will rise by 1% but remain 14% below 2019 levels. Commercial-vehicle sales, less hard-hit by the pandemic, will fall further. Supply-chain blockages will linger, though a shortage of chips will recede. Energy shortfalls and higher prices will take a bigger toll, particularly in Europe. Carmakers will struggle to pass on rising costs to buyers as inflation erodes consumers’ incomes and savings. Profits will drop.

Even electric vehicles will accelerate less sharply. Global sales, which doubled in 2021, will increase by 25% to 10.8m, or around 20% of the total new-car market. China will account for more than half of these as it backtracks on plans to scrap tax breaks for fear of stifling demand. China will also impose the world’s strictest emission standards for fossil-fuel vehicles. Germany’s sales of electrics will slip as it cuts subsidies. But electrics offer the best hope for carmakers in the long run, so they will launch more of them.

New electric models will tend to be bulkier, like Tesla’s delayed Cybertruck or sport-utility vehicles from BMW, Hyundai and others. Robot axis will take to the roads in China, the United Arab Emirates and elsewhere. Two German cities will hold trials of “level four” autonomous vehicles, with human drivers barely needed.

Energy

The energy crisis will deepen in 2023, particularly in Europe. Under Western sanctions, Russian hydrocarbon flows will dwindle as the eu widens bans on Russia’s oil and it retaliates by ending virtually all gas supplies. But Asia will help push up global oil demand, which will rise by around 1.5% — or 1.5m barrels a day (b/d) — to exceed pre-pandemic levels. opec will grudgingly raise oil output by 2.4m b/d, suppressing prices a bit. Winter will deplete Europe’s gas stocks, and flows of liquefied natural gas (lng) will fall short. Germany and Italy will open lng regasification terminals, but compete with buyers in Asia.

All this will keep oil and gas prices high, even as energy-consumption grows by a meagre 1%.