Business Climate Survey: Stimulus Hopes

The crystal ball is very cloudy, according to the results of IBO’s Spring 2009 Business Climate Survey. Twice a year, IBO surveys executives at analytical and life science instrument and laboratory product companies to gage their expectations for business conditions in the short term, and to gain their opinions on current issues affecting the market. For its latest survey, IBO surveyed 24 executives at instrument and laboratory product companies and suppliers by phone and email in late April and early May.

There is no question that the weakened macroeconomic environment has severely impacted instrument and laboratory product sales since late last year. It is also evident that the negative effects have varied depending on a given company’s end-markets, product lines, geographical markets and financial resources.

This variation is evident in the survey results. One area for which was there was less consensus than usual was the outlook for the instrument business for the next six months. Thirty-three percent of respondents believe that prospects for the instrument business will decline in the next six months, down from 43% in the fall 2008 survey (see IBO 10/15/08). Please note that the fall 2008 survey consisted of a different sample set.

However, 38% of respondents believe that instrument business prospects will stay the same in the next six months. This is the same percentage as in the fall 2008 survey. Twenty-nine percent of the executives surveyed expect sales to increase moderately, but 0% expect sales to increase substantially. The expectations for a moderate increase in sales may be attributed to stimulus-related activity, as indicated below, or seasonal effects. In any case, the results further highlight the uncertainty surrounding the market near term.

Respondents were also asked what measures their companies had taken this year to stimulate sales and were provided with six choices: change in distribution approaches; lower prices; more targeted marketing; offering better payment terms; none; and other. Respondents could mark as many answers as applied.

Thirty-four percent of survey participants utilized more targeted marketing. The same percentage of respondents cited the use of other actions. Among these actions were incentives, new applications, special financing, expanded sales forces, more advertising and going direct. Efforts cited by multiple respondents were new products and promotions. The range of actions suggests the numerous mechanisms that firms have at their disposal to attract customers. Seventeen percent indicated that they lowered prices, 5% offered better payment terms and 2% took no action.

The next two survey questions specifically addressed stimulus funding. Asked what type of effect the respondents expected government stimulus plans worldwide to have on their companies’ sales, 74% responded positive, out of three available choices: very positive, positive and none. Only 17% answered very positive, suggesting that the majority of survey respondents do not expect stimulus money to be a panacea. Nine percent stated they expected no effect.

Respondents were then asked to detail the effect that government stimulus plans have already had on their firms by indicating whether they had received inquires or orders, or that the plans have had no effect. Responses were asked for North America, Europe and Asia. In North America, 44% of respondents had received inquires, and 12% had received orders. However, 44% indicated no effect. Although North American stimulus plans appear to have had the biggest impact so far, note that survey results are skewed to the region due to the fact that the majority of respondents are based in the US.

In Europe, stimulus effects were more elusive, as only 6% of surveyed companies had received inquiries and 94% indicated no effect. In Asia, 74% of respondents stated that there had been no effect, but results were better than in Europe, as 16% of respondents reported inquires and 11% reported orders.

Executives were then asked when they expect sales for the analytical instrument industry to improve and were given four possible answers: mid-summer; fall; early 2010; and later. Seventy-four percent of respondents expect sales to improve in early 2010, and 21% expect them to improve as soon as fall. But 21% also expect sales to improve later than early 2010. As with the first question, the range of answers suggests little market visibility. However, the optimism for next year is in line with some economic forecasts.

As usual, IBO asked respondents about their expectations for instruments sales for the next six months by region and end-user market. China continues to have the brightest prospects among the nine geographic areas. Stimulus plans played a role in increasing sales expectations for the academic and government markets.

Chart: Executive Expectations for Instrument Sales for the Next Six Months

Spring 05 Fall 05 Spring 06 Fall 06 Spring 07 Fall 07 Spring 08 Fall 08 Spring 09 Decline

0% 0% 4% 0% 0% 4% 0% 43% 33% Stay The Same

23% 29% 38% 36% 58% 32% 41% 3 5% 38% Increase Moderately

73% 67% 50% 56% 33% 56% 59% 17% 29% Increase Substantially

4% 4% 8% 8% 8% 8% 0% 4% 0%

Chart: Six-Month Sales Outlook Avg. Ratings: Spring 2009 vs. Fall 2008

Fall 08 Spring 08

Elec./Semicon. 2.2 2.2

Metals/Mining 2.5 2.3

Chemical 2.4 2.4

Pharma 2.6 2.8

Biotech 3.0 3.0

Environment 2.9 3.2

Agriculture 2.9 3.2

Food 2.9 3.4

Govt. 2.4 4.0

Academia 2.8 4.0

Chart: Six-Month Sales Outlook Avg. Ratings: Spring 2009 vs. Fall 2008

Fall 08 Spring 09

Japan 2.4 2.4

Eastern Europe 2.7 2.6

Western Europe 2.6 2.8

North America 2.6 2.8

Latin America 2.8 2.8

Middle East 2.9 3.0

Southeast Asia 3.2 3.1

India 3.1 3.3

China 3.4 3.6

< | >