The US is pretty much the sole reason global defense spending is falling

The world is racked with conflict these days: The war in Syria is in its fourth year; a recent and much-touted ceasefire in Ukraine ended almost as soon as it began. And there are plenty of ambitious emerging countries that are sprinting to raise their military status: China, India, Russia, the United Arab Emirates and Saudi Arabia are in the midst of military modernizations. Just this week, India approved $8 billion in spending on a new submarine fleet.

But as a new report from the consulting firm Deloitte demonstrates, this doesn't translate to better times for the global defense industry as a whole. Just the opposite, in fact. According to the firm's global aerospace and defense industry outlook for 2015, revenues for defense companies are expected to decline 1.3% in 2014, after 1.3 and 0.9% declines in 2012 and 2013, respectively.

As this chart demonstrates, the global defense industry has seen its revenues dip by $30 billion since 2010:

It would be tempting to attribute this to a new era of global peace and declining conflict. Instead, the dip in revenue owes almost entirely to new US spending controls implemented in 2013 - the ongoing budgetary sequester. And it's because of the end of two US military operations in particular: "Overall global defense spending is declining," the report states, "resulting mainly from reduced armed conflict in Iraq and Afghanistan."

Of course, war is ongoing in two countries - the US just isn't as involved anymore.

The Deloitte report offers plenty of reasons for defense contractors to believe that these revenues aren't about to come back. As it explains, cost overruns in big-ticket defense programs have made politicians and the US public wary of committing to major projects (the notoriously expensive F-35 may well have something to do with this).

At the same time, in the absence of a major American ground operation, the US is trending towards preventative capabilities - surveillance, intelligence, and unmanned technologies that are cheaper to produce and maintain than tanks, armored personnel carriers, or other, more traditional hardware.

As the report concludes, "there is a need to continue improvements to recognize, encounter, and contain aggression in a manner that increasingly keeps the war fighter out of harm's way." In other ways, American military policy is changing in ways that are forcing the defense industry to permanently adapt.

There are plenty of countries that are increasing spending. China is building everything from anti-ship missiles to stealth fighters; India and Russia are cooperating on a fifth-generation war plane, and Russia may be in the very early stages of building a new aircraft carrier.

But the US's share of global defense spending is so large that a relatively stagnant Pentagon budget is enough to bring down the global industry as a whole. The US accounts for nearly 40% of worldwide defense spending nearly as much as the next 15 countries combined:

So the US is still such a dominant military power that even small changes in its policy can shift the entire defense industry.

But less encouragingly, the state of the defense industry isn't any kind of indicator of whether war and militarization are on the downswing.

Read the whole thing here.