The optimism that instrument and lab-product makers showed in the spring for the industry’s outlook has dimmed but is still bright. In the latest IBO Business Climate Survey, 60% of respondents expect business prospects for the next six months to increase moderately, compared with 73% in the spring Survey (see IBO 5/15/14). However, this percentage tops a year ago, when only 39% of respondents expected sales to increase moderately (see IBO 10/15/13). Thirty percent expect sales to stay the same, up from 19% last spring and down from 45% in fall 2013.

IBO’s fall Business Climate Survey was conducted online in the first half of October. The 30 respondents included IBO subscribers and other instrument and laboratory-product suppliers, manufacturers and distributors. Not all respondents answered each question, and the set of respondents differed from spring to fall.

Also adjusting expectations slightly lower was the International Monetary Fund (IMF). Updating its “World Economic Outlook” this month from July (see IBO 7/31/14), the IMF lowered its outlook for both 2014 and 2015 for World Output by one-tenth and two-tenths of a percentage point (see table, page 6), respectively. The 2015 outlook for Advanced Economies was lowered by one-tenth of a percentage point, while 2014 and 2015 prospects for Emerging Market and Developing Economies was adjusted downward by one-tenth and two-tenths of a percentage point, respectively.

Similarly, the Organization for Economic Cooperation and Development (OECD) has revised its forecast from May. The 2014 and 2015 outlooks have been downgraded for the US, the Euro Area and Japan by four-tenths, six-tenths and one-tenth of percentage points, respectively. Despite these changes, both organizations forecast economic growth to accelerate in 2015 for most regions, with the exception of the UK and China.

China’s economy continues to be an area of concern. This fall’s Survey addressed the specific issues contributing to the slowdown of instrument and lab-product sales in the country by asking respondents to rate three issues’ effects on their companies’ sales over the past six months. Ratings were given on a scale of 1 to 5, with 1 indicating no effect and 5 indicating a severe effect. Two of the three issues respondents were asked to rate, the country’s crackdown on corruption and weakening economic growth, received the same average rating of 2.1. The reorganization of the China FDA received an average rating of 1.9. “Other” received the highest average rating at 3.2. However, few respondents specified the exact “Other” issue. Of those that did, the answers included “political issues,” “longer decision lead times,” “localization” and “new funding rules.”

To gauge the outlook for the Chinese market, IBO asked respondents about their expectations for the instrument and lab-product industry’s sales growth in the remainder of 2014 and for 2015. Respondents were asked to choose among five responses. As the graph below shows, the highest percentage of respondents characterized prospects in China as “weakening growth across multiple end-markets.” However, “general weakening of growth in certain end-markets” and “general strong growth with pockets of weakness in certain end-markets” was each chosen by more than 20% of respondents, indicating the range of expectations for the country.

In light of Merck KGaA’s agreement to acquire Sigma-Aldrich (see IBO 9/30/14), IBO also posed a question addressing the effects of industry consolidation on the industry in general. Respondents were asked to rate five possible effects on a scale of 1 to 5, with 1 indicating no effect and 5 indicating a severe effect. The graph below shows the percentage of respondents’ ratings for each possible effect. Receiving the highest average rating at 3.4 was “customers using fewer suppliers,” followed by “increased price competition” at 3.1. “Increased collaboration/partnership efforts for innovation” received an average rating of 2.7, while both “increased distribution opportunities for suppliers” and “increased investments in industry” each received a 2.5.

Respondents were also asked what has been one effect of industry consolidation on their companies. Three answers specifically noted pricing. One respondent wrote, “competitors underpricing their competitive products by bundling them to higher-priced items, causing destructive pricing in the bundled items.” Two respondents mentioned bundling alone. Increasing sales challenges were noted by three respondents. Two respondents noted decreased innovation.

As usual, respondents were also asked to rate their six-month outlook for several regional markets, with 1 indicating worsening prospects, 3 indicating stability and 5 indicating improving prospects. As in the spring, North America was the highest-rated region on average at 3.8. Average ratings also improved from the spring for India, Japan and Latin America. But Southeast Asia and Western Europe, which received the second- and third-highest average ratings in the spring, slid to sixth and seventh place this fall. In addition, the outlook for China also declined, falling two-tenths of a percentage point with the country moving from fifth to eighth place. The expected outlook fell for five of the nine regions. The overall average rating for all regions was 3.2.

Asked to rate their six-month outlooks for 12 end-markets using the same ratings, respondents gave an average rating of 3.3 for all categories. As in the spring, biotechnology, energy and environmental were the top-rated markets, even though the average rating for each dropped. In fact, the average rating increased from the spring for only one market, agriculture, rising from 3.1 to 3.4. Average ratings for academia and food were the same. Metals/mining and government remained the lowest-rated markets.