Despite indications that the global economy is continuing to slow, the outlook for sales growth within the instrument and lab product industry is positive. In late October, 15 industry executives completed the online IBO Business Climate Survey. The respondents were IBO subscribers and other solicited participants, each representing a unique company or business unit. The sample of respondents differs with each survey.

Since the last survey (see IBO 5/31/15), the Organization for Economic Co-operation and Development (OECD) has released two updates of its 2015 economic forecast—in June (see IBO 7/31/15) and in September (see table, page 3). Compared with the June revision, the new forecast showed a decrease of one-tenth of a percentage point for world GDP. While some advanced economies, such as the US and the euro area, experienced recovery, emerging markets fared worse. Information on China was mixed.

Considering the OECD’s lowered outlook, survey participants overall were optimistic about the instrument and lab product industry’s prospects for the fourth quarter of this year and first quarter of 2016 (see line graph, page 3). No respondent expected a decline in prospects. In fact, 73% believed that sales would increase moderately, up from 57% in the spring survey (see IBO 5/31/15). While 43% of the most recent Survey’s participants expected sales to remain unchanged, only 20% made the same prediction for this survey. These results match those of the spring 2014 Survey (see IBO 5/15/14), which showed the strongest outlook since spring 2005 (see IBO 5/15/05).

In this fall’s Survey, participants overall anticipated some effects of currency, with 60% expecting business to increase moderately. With currency effects excluded, two respondents predicted a decline in business prospects. One cited the strength of the US dollar, commenting, “[I]t makes imports very expensive. That, layered on top of weak growth in many economies, will present some big problems.”

The OECD’s outlook for Brazil’s GDP has been falling, and the latest revision was no exception. At -2.8%, the most recent prediction for the country in 2015 was two percentage points lower than in the previous revision. Survey participants were asked to indicate the current impact of Brazil’s economic downturn on their companies’ analytical instrument and lab product businesses in general. On a scale of 1 to 5, with 1 corresponding to no threat and 5 meaning a severe threat, the average response was 2.1, with 80% percent of respondents expecting little to no effect.

Economic indicators from China were inconsistent, according to the OECD. Through the second half of this year, year-on-year GDP growth was reported at about 7%. But some industries and business investment have slowed down, as have imports, as suggested by some data. The government has announced stimulus measures, but it is unclear as to whether they will be sufficiently effective. The polled executives were asked to assess the current impact of China’s economy on their companies’ businesses on the same scale as for Brazil. The Chinese economy was a greater concern, although the average rating, 2.9, was still moderate.

This fall’s Survey also asked participants about the potential for a number of factors to affect the instrument and lab products industry in general in 2016. Respondents ranked the possible business challenges in order of their expected impact on the growth of the industry Rankings were from 1 to 6, with 1 as the most significant factor and 6 as the least significant. In ranking the possible challenges to the industry, the option with the greatest number of respondents ranking it first, 33%, was slower global economic growth (see graph above). Considered the least significant threat by 60% of those surveyed was sluggish growth of emerging markets. The weighted average of responses, however, showed that the greatest concerns to the industry were pricing pressure, lab budget constraints and slower global economic growth.

Survey respondents also ranked the potential business opportunities according to their expected impact on the growth of the analytical instrument and lab product industry in general in 2016. Rankings were again from 1 to 6, with 1 as the most significant factor and 6 as the least significant. New product sales growth was ranked first by the most respondents, at 47% (see graph below). Price increases was the choice most frequently selected as the least significant opportunity, at 40%. The weighted average indicated that the most significant opportunities were new product sales growth, US market sales growth and biopharma sales growth.

Consistent with previous Business Climate Surveys, respondents were asked to rate prospects for their respective companies by geographic region on a scale of 1 to 5, with 1 indicating worsening prospects, 3 indicating stable prospects and 5 indicating improving prospects. Contrasting with the OECD outlook, survey participants predicted stable to improving prospects for all regions except Eastern Europe, which received an average score of 2.9 (see graph above). Although India dropped by 0.2 points compared to the spring survey, growth was predicted to be stable with an average score of 3.3. North America received the highest rating at 4.3, up 0.6 points from the spring.

Survey participants also rated prospects for their companies by end-markets on the same 1 to 5 scale. The biotechnology industry rated highest, at 4.2, rising 0.5 percentage points from the spring (see graph below). The largest increase since this spring’s Survey was for chemicals, which improved 0.8 points to 3.7. The metals and mining, and electronic and semiconductor industries received slightly lower-than-stable average scores of 2.9 and 2.8, respectively. Electronic and semiconductor, and energy were the only end-user prospects to decrease from the spring Survey, falling 0.3 and 0.5 points.