In January, when IBO’s original forecast was published (see IBO 1/15/16), a great deal of information about the fourth quarter of 2015 was still unavailable, much less anything regarding the coming year. However, six months into 2016, additional information can be brought to bear on IBO’s overall baseline forecasting of the market for the year.

Nevertheless, our existing information about the historical trends in the market, combined with the consensus view of macroeconomic factors, allowed us to develop our presentation of the market data for 2016. At that time, major factors that influenced our thinking were the strong dollar, cratered oil prices and the cooling, but still vital, economic growth in China. Since then, a number of developments have arisen that demand a re-evaluation of the growth prospects in our industry.

Perhaps the most astonishing occurrence was the Brexit vote, apparently committing the UK to leaving the EU, which passed by a narrow majority. It is not clear how rapid this process will be. The EU Parliament has called for the UK to “immediately” invoke Article 50, beginning the formal withdrawal from the EU. However, the UK government has not signaled any plans to do so, with new Prime Minister Theresa May indicating a need to develop plans and objectives before triggering Article 50, and subsequently carrying out the ensuing negotiations with the EU and its member states to establish the new situation. What does seem clear is that the vote has already had a negative effect on the UK economy, but its full effects may not be felt until later in the year or into 2017 and beyond.

From historic lows of under $30 a barrel at the beginning of the year, oil prices have rebounded and are currently hovering around $45 a barrel. However, crude prices are expected to remain volatile as inventories are still high and fears of overproduction continue to curtail investments by the oil and gas sector. Cheap oil creates stimulating effects on some sectors of the economy, but nations heavily dependent on oil are still suffering.

The International Monetary Fund (IMF) has revised its view of the macroeconomic situation from its past position. In October 2015, its “World Economic Outlook” called for 3.4% global growth in 2016. In April, this was revised downward to 3.2% and most recently, in July, the forecast slid to 3.1% for the year. This matches the final growth projection for 2015, representing perhaps a new status quo. The Advanced Economies are predicted to slip from 1.9% growth in 2015 to 1.8% in 2016. Conversely, Emerging Markets and Developing Economies growth will accelerate from 4.0% in 2015 to 4.1% in 2016.

In the advanced economies, the eurozone should experience a brighter 2016 than 2015, while the US, UK and Japan are cooling off. Among developing nations, the economies of Russia, Brazil and Nigeria are expected to contract in 2016. India and China will again be the fastest growing economies in the world, but both are expected to advance less in 2016 than in 2015. The IMF growth forecast for China has been adjusted up to 6.6%, while India’s has been adjusted down to 7.4%.

Currency effects have also upset some of our original assumptions. Perhaps the most dramatic change across the first half of 2016 is the increasing strength of the yen, gaining in double digits on the dollar. The Bank of Japan has acted to stabilize the situation, but the stronger yen is still bound to increase imports into Japan and provide a boost to Japanese demand. In contrast, the pound has fallen considerably due to the Brexit vote, although looking at Europe as a whole, this is counteracted by a stronger euro. The Brazilian real continues to depreciate, but the Mexican peso has regained some ground against the dollar.

IBO’s original January estimate for growth in demand for the analytical and life science instrumentation and lab products industry was 3.5% for 2016. While the slow ending of 2015 spilled into the start of 2016, the situation has improved, and has already been reflected in results from many market participants. After combining the external and internal indicators and factors in the marketplace, IBO has revised its 2016 forecast upward to 4.1% growth, a significant increase. On balance, currency effects are not expected to play a large part in affecting market figures, but they will certainly be felt in particular countries, such as Japan. While the Japanese economy remains sluggish, our estimate for 2016 growth has now been revised upwards from 1.1% to 6.3%, due primarily to currency effects.

Other changes in the regional forecast for 2016 are relatively minor in contrast, with North America and Europe edging fractionally downward. China remains one of the hottest markets, and our forecast has now increased by almost a full percentage point to 7.7%. Prospects in India have also brightened, with our forecast for 2016 climbing from 5.1% to 6.2%. While Mexico’s currency has improved, the Brazilian real has declined and the general economic situation in Brazil has also worsened, producing a severe decline. Consequently, the Latin American market is now forecast to contract 0.6% for the year.

Turning to the four application sectors, the greatest upward adjustment has been the pharmaceutical and biotechnology sector, increasing from the original forecast of 4.1% growth to 6.1%. The outlook for the public sector and the applied markets has also improved, but only by relatively minor amounts. Despite the overall increase in the forecast for 2016 demand, the industrial sector faces contrary indications. The industrial demand forecast has been adjusted downward from 2.9% to 1.8%.

Although it is difficult to make general statements, these trends are also reflected in the forecasts for individual instrument technologies. The outlook for life science instrumentation has improved, fueled by the pharmaceutical and biotech, and academic research markets. Conversely, the forecast for instrument technologies important to materials analysis and other industrial testing has, as a rule, been adjusted downward.