Volvo 2006 Annual Report Download - page 12

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Market overview
Global economic trend
The global economy continues to register solid growth. In recent years,
global GDP growth has ranged from 4 percent to 5 percent, the highest
level since the 1970s. The positive trend is evident in most global regions
but is particularly noticeable in China, Eastern Europe and other emerging
markets.
Nowadays, these growth markets account for a substantial share of the
world economy and represent an increasingly integral part of the global
production system with their extensive trade. Their share of overall global
exports is currently 40 percent, compared with 20 percent in the 1970s.
Transport requirements
Social developments worldwide are fuelling an expansion in trade, locally as
well as among regions and continents. The growth in trade is creating higher
transport requirements, both for goods and people.
Transport vehicle requirements are cyclical but the industry has an under-
lying growth rate of about 4 percent annually in mature markets over a busi-
ness cycle. In growth regions such as Asia and Eastern Europe, the growth
rate is considerably higher.
Commodity prices
Rapid growth in global economy has resulted in high demand for energy. Oil
prices have risen sharply in recent years, with a peak price of USD 75 per
barrel in summer 2006. Prices levels have fallen since then, reaching about
USD 59 per barrel at year-end 2006. While at the same time that there is a
high demand for energy, the supply is limited, due partly to the political
unrest in the Middle East, which affects prices. The prices of raw material
to industry, such as metals and rubber, also rose during the year.
Fuel costs are a significant part of the operating cost for many of Volvo
Group’s customers. Generally, Volvo Group customers have proven skillful in
offsetting fuel costs.
05
3.33.23.92.51.6
2.71.41.70.80.9
06030204
USA
Europe
Annual GDP growth.
Source: Consensus
Economics
Growth in USA and Europe, % Growth in Asia and China, %
05
5.04.85.14.63.6
10.610.210.110.09.1
06030204
Asia
China
Annual GDP growth.
Source: Consensus
Economics
8 A global group 2006