Now with the first six months of 2014 in the history books, it is appropriate to estimate how the remainder of the year will develop, and importantly, how the current full-year estimates match with IBO’s original forecast (see IBO 1/15/14). In January, our industry forecast was based on the previous year’s results without the benefit of fourth quarter 2013 data. However, we were able to assess the impact of macroeconomic trends and appreciate the general momentum of the market. Following the two subpar years of 2012 and 2013, the likelihood of a third poor year seemed remote, and pent-up demand was another positive consideration.

Although the first few months of 2014 were not very encouraging, with various economic, financial and political developments as well as weather-related growth impediments leading to some uncertainty concerning the hoped-for macroeconomic rebound, the global economic situation did improve. This was especially true for the US and most European countries. Conversely, growth slowed appreciably in developing countries.

Macroeconomic trends have steadily improved since the start of 2014. Since the first quarter, various economic-forecasting organizations have pronounced that 2014 will be a good year. In April, the International Monetary Fund (IMF) issued its revised forecast that heralded a generally improving global economy, a markedly more optimistic prediction than its October 2013 pronouncement (see IBO 1/15/14). It indicated that global activity had broadly strengthened and was expected to improve further in 2015, with much of the impetus for growth coming from developed economies.

In its July forecast update, the IMF projected global growth to strengthen from 3.2% in 2013 to 3.4% in 2014 and 4.0% in 2015. In advanced economies, growth should increase to 1.8% in 2014, an improvement of five-tenths of a percentage point compared to 2013, and 2.4% in 2015. Key drivers are a reduction in fiscal tightening, except in Japan, and still highly accommodative monetary conditions. Growth will be stronger in the US and positive but varied in the euro area, with the core group of EU countries offering the greatest strength.

For developing countries and emerging markets, growth is projected to pick up gradually to 4.6% in 2014 and 5.2% in 2015. Growth will be helped by stronger external demand from advanced economies, but tighter financial conditions will dampen domestic demand growth. In China, growth is projected to be 7.4% in 2014, as authorities seek to rein in credit and advance reforms.

IBO’s original forecast for analytical and life science instrument industry sales in 2014 was a growth rate of 5.2%. This was a significantly higher projection than the less-than 3% growth in each of the previous two years. Most industry suppliers have reported modest growth in the first quarter of around 4%. Second quarter financial reports suggest growth has moved up to slightly less than 5%, in spite of government-related purchasing delays in China and economic malaise in Latin America. Several firms reported that order flow picked up, which promises higher revenues for the third quarter, and noted a general sense that the second half of 2014 could exhibit growth of nearly 6%.

Based on these reports and the improving global economy, IBO is revising its forecast for 2014 up slightly to 5.4%. This is not a significant change, but one that signals confidence in this year’s prospects for the industry.

Macroeconomic activity can affect the outlook for our industry, but it does not necessarily affect each region in the same manner. While the global economy has significantly improved since 2013, some regions and countries are doing better than expected, but others are experiencing difficulties. Growth in China will likely be lower this year than experienced for over a decade due to government budgeting issues, especially related to the China Food and Drug Administration. Most suppliers have experienced a decline in business in China during the first two quarters, but recent order pickup and a leveling off of government restrictions suggest the second half will be much better.

Latin America is also a disappointment due to poor economic progress and financial issues. Developing nations in general show reduced growth prospects, while North America and Europe are experiencing a nice turnaround in growth. Lastly, the impact of the yen devaluation in 2013, which reduced industry growth in that year by about one percentage point, should have minimal effect in 2014.

Growth estimates for end-markets also differ by application sector. Our revised forecast suggests that only the public sector, primarily government and academia, has a lower growth profile than originally estimated. While government budgeting, especially in the US, is becoming more expansive, funding is slow to translate into instrument orders—although the remainder of the year looks more promising—which limits the projected impact. The pharmaceutical/biotechnology sector is achieving better-than-expected revenue growth, especially in the US, while the applied sector, particularly clinical diagnostics and environmental testing, is also a strong performer.

Industry growth prospects for most analytical techniques is estimated to be slightly better than originally projected, mostly due to the generally improving global economy. Life science instrumentation, especially DNA sequencers and related techniques, is capitalizing on the prospects of genomics and other omics applications. MS, as usual, will do well, except for the slowdown in the important China market. Surface-science techniques look to also have a strong year.