Oct 22 2013
The US economy has long been shifting away from manufacturing activities and toward the provision of services. Domestic firms have offshored or outsourced most manufacturing activities to countries with low labor costs like China, Vietnam and Mexico, resulting in a sharp decline in manufacturing sector revenue during the past two decades. In the five years to 2013, manufacturing sector revenue is estimated to fall at an average annual rate of 0.3%, despite the fact that most manufacturing activities have already been established overseas.
By contrast, service industries in the United States have thrived. The $13.9 trillion sector is estimated to grow at an annualized rate of 7.0% in the five years to 2013, signifying the economy’s drastic move toward more service-based industries. However, with the onslaught of emerging small businesses, it can be difficult to determine which of the country’s 20.5 million service providers are actually performing well. IBISWorld queried its database of more than 1,200 industries to determine the top service industries. Companies in the consulting, housing, healthcare, business support and consumer goods sectors are currently among the cream of the crop in the United States economy.
The $27.4 billion Scientific and Economic Consulting industry tops IBISWorld’s list of the best-performing service industries. Companies in this industry provide advice and assistance to businesses with various specializations. Because the industry’s market base is so vast, demand is plentiful and strong, even in times of economic weakness. In the five years to 2013, this industry’s main driver of growth has been the mining and energy market, which has required feasibility studies pertaining to new or improved sources of energy. As a result, the Scientific and Economic Consulting industry has grown at an average annual rate of 6.2% since 2008. Profit margins for operators in this space are also attractive, averaging about 9.0% of revenue in 2013. As the US economy continues to rebound and corporate profit climbs, demand for the industry’s services will continue to mount. IBISWorld projects industry revenue to increase at an annualized rate of 6.5% in the five years to 2018, proving this industry to have a hotbed of opportunities.
Similarly, the Environmental Consulting industry, valued at $16.6 billion, has grown robustly during the past five years on the back of rising demand for sustainability and preservation. Aside from offering remediation services, firms in this industry also consult businesses throughout the economy on how to minimize their environmental impact. Despite weakened demand during the recession, the industry is estimated to enjoy annualized growth of 2.8% in the five years to 2013, with profit at about 6.5% of revenue in 2013. Because the environment has taken center stage in recent years, companies in this space are well positioned to continue growing in the five years to 2018; IBISWorld anticipates revenue to grow at 5.9% per year on average over the next five years.
During the recession and several years after, the housing sector suffered immeasurably. Businesses in the sector declared bankruptcy, unable to retain demand for their services. Fortunately, as demand for housing has slowly started to trend upward and consumer incomes have expanded, demand for home services has also recovered. The Landscaping Services industry is estimated to grow at an annualized rate of 1.3% to $70.6 billion in the five years to 2013. Operators in this industry are currently enjoying an estimated 6.0% profit margin and face a rosy outlook. Continuous recovery in the construction sector and in consumers’ wallets will underpin the industry’s forecast growth of 5.9% in the next five years.
In a similar vein, the $11.1 billion Pest Control Services industry is estimated to expand at 1.9% per year, on average over the five years to 2013. Operators in this industry received an extra boost during the recent nationwide bedbug infestation, supporting revenue and profit growth. As consumers and businesses loosen their purse strings with the improved economy, the industry will benefit from rising demand. This industry’s revenue is forecast to grow at an annualized rate of 5.0% in the five years to 2018, while profit margins are expected to remain strong at about 7.3% of revenue during the outlook period.
Companies providing services to other companies have benefitted from the quick rebound in corporate profit following the recession. While business expenditure came to a halt in 2008, firms returned to spending in 2009 and 2010 as corporate profit recovered 7.5% and 26.8%, respectively. As a result, theTranslation Services, Document Preparation Services and Public Relations Firms industries all had a solid performance during these years. The widening focus of many US companies has boosted demand for the Translation Services industry, supporting estimated, annualized revenue growth of 2.4% to $3.2 billion during the past five years. With transcontinental transactions becoming more widespread with the help of the internet, this industry is anticipated to continued to grow at an annualized rate of 3.9% during the five years to 2018.
The Document Preparation Services industry has expanded on the back of growing demand from the finance and insurance sectors. With mounting oversight ruling these businesses, the need for professionally prepared documents is strong. IBISWorld estimates revenue to grow at an average of 1.5% per year, to $4.6 billion, in the five years to 2013, and it is forecast to continue to grow at an average rate of 3.9% per year as the economic recovery continues to pick up steam.
Public relations firms, which generate a total of $12.6 billion, have gained prominence in the past five years due to the increasingly competitive market. With consumer discretionary incomes falling, companies have had to invest in professional image and publicity services to gain prominence and outperform their competition. As a result, the Public Relations Firms industry is expected to grow 3.2% per year, on average in the five years to 2013. Larger corporate budgets and intensifying competition will continue to prop up industry revenue in the five years to 2018; IBISWorld projects the industry will grow at 3.6% per year on average.
Doctors, hospitals and in-home care providers are all anticipated to benefit from the recent healthcare reform. Consequently, participants in the Laboratory Testing Services industry, which offers medical testing to a plethora of healthcare providers, are poised to record solid growth in the five years to 2013. During this period, the industry is expected to increase at an annualized rate of 2.6% to $16.8 billion on the back of mounting healthcare demand. As access to medical care continues to rise in the next five years, revenue for laboratory testing providers is forecast to rise at an annualized rate of 5.1%, making this one of the best-performing service industries in the United States. Additionally, operators enjoy profit margins of more than 9.0% of revenue, highlighting the industry’s in-demand services.
When Americans shop online, they not only support e-commerce businesses; they create demand for the Packaging and Labeling Services industry. As a result, industry revenue is estimated to rise at an annualized rate of 1.3% to $6.0 billion in the five years to 2013. Along with a strong rise in spending and online shopping in the five years to 2018, industry revenue is projected to grow 5.1% per year on average. Businesses in this space will continue to enjoy wide profit margins of about 7.8% of revenue over the next five years in light of rising demand.
The service sector of the US economy has long outperformed its manufacturing counterpart. Without a doubt, there are opportunities in this sector for existing and aspiring businesses. IBISWorld anticipates that corporate and consumer demand will continue underpinning service sector growth during the five years to 2018. The service sector is anticipated to grow at an average annual rate of 3.3% to $16.3 trillion during this period and, while the manufacturing sector is projected to turn around and grow by 2.4% per year on average in this same time period, businesses on the service end of the spectrum will continue to fare much better.