Although daily world events and economic indicators can affect macroeconomic growth prospects, future sales growth for instrument and laboratory product sales generally are more determined by longer-term scientific and end-market trends. Nonetheless, macroeconomic conditions can have a delayed effect on instrument and lab product sales, as they ultimately affect investment decisions by end-user industries and government.

Although economic uncertainty continues to linger due to austerity measures in the EU and slowing growth in China and other developing markets, results of IBO‘s annual Spring Business Climate Survey indicates slightly more optimistic sentiments about overall industry growth than in fall 2011 (see IBO 10/15/11). Forty-seven percent of respondents expect instrument and lab product sales to increase moderately in the next six months (see graph, page 4), compared with 44% last fall. However, this is a decline from 59% a year ago (see IBO 5/15/11). Forty-two percent of respondents expect sales to remain the same, compared with 44% last fall and 41% a year ago.

The IBO Spring 2012 Business Climate Survey was conducted via email over the last week of March and the first week of April. IBO sent an email containing a web-based link to the Survey to current subscribers, including multiple subscribers at the same company. IBO received 36 surveys, including multiple responses from different personnel at the same company. Not all questions were answered by each respondent.

For questions addressing personal evaluations of industry expectations, IBO calculated results based on all the surveys received. For questions that ask respondents to answer on the behalf of their companies, multiple responses from the same company were averaged and only one response was entered per company.

Similar to IBO’s survey, respondents to KPMG International’s Global Business Outlook are more optimistic than last fall. Conducted in February, the survey compiled responses from executives at more than 11,000 companies. Of those surveyed, 25% expect their companies’ R&D spending to be higher this year, compared with 22% in October 2011. By region, 26% of US, 24% of BRIC (Brazil, Russia, India, China) and 23% of EU executives expect R&D spending to increase. Thirty percent of respondents expect capital spending to increase in the coming year, compared with 23% in October 2011. By region, 32% of US, 39% of BRIC and 27% of EU executives expect such an increase.

Although respondents to IBO’s Spring 2012 Business Climate Survey were also more optimistic, concerns about academic and government end-markets remain high, according to Survey results. Asked their personal views on which of four issues facing the instrument and lab product industry in 2012 was the most pressing, 41% of respondents chose “weakness in US and European academic and government spending.” Twenty-six percent chose “weakness in other European markets,” 18% chose “slowing economic growth in developing countries” and 15% chose “maintaining strong growth in profitability.”

IBO survey respondents were also asked their views on which of four growth drivers would have the most positive impact on the instrument and lab product industry in 2012. Over half of survey participants, 56%, chose “developing countries,” suggesting that, as in the previous question, slower growth in developing countries such as China and Brazil has not affected instrument and lab product sales. Twenty-two percent of respondents chose “applied markets,” and 19% chose “new applications.” However, only 3% of respondents chose “accelerating US growth.”

For the next survey question, respondents were asked to rank four priorities from 1 (most important) to 4 (least important) for their companies’ instrument and lab products businesses over the next six months. Not surprisingly, 50% of respondents ranked “higher sales growth” as the top priority. “Investment in developing countries” received the next-highest percentage of number 1 rankings at 29%. Fourteen percent of respondents ranked “investment in sales and marketing” as the top priority and 7% cited “improving operational efficiency.”

While there was a clear majority for the highest-ranked priority, the second-highest priority varied considerably among respondents. Twenty-seven percent of respondents each ranked “higher sales growth,” “improving operational efficiency” and “investment in developing countries“ as their second-highest priorities. “Investment in sales and marketing” was ranked second by 20% of respondents.

Asked to rate six-month prospects for their companies’ instrument and lab product sales on a scale of 1 (worsening) to 5 (improving) by region or country, surprisingly respondents gave the highest average rating to India. India was also the only country to receive an average ranking of more than 4. India recorded the largest improvement compared with last fall, with its average rating increasing six-tenths of a point.

In a sign of stable market strength, the four highest-rated regional markets in this spring’s Survey—India, China, Southeast Asia, Latin America—were also the top four in the fall 2011 Survey. In addition, the average ratings for all regions increased this spring compared with last fall.

However, the average ratings for the Middle East, Eastern Europe and Western Europe declined this spring compared with fall 2011. Not surprisingly, Western Europe replaced Japan as the region with the lowest average rating. In fact, Western Europe also showed the largest decrease in average ratings among all regions, with its average rating declining from 2.8 last fall to 2.1 this spring. The average rating for all regions was 3.3.

Just like a year ago, the environmental market had the highest average rating among 11 end-user markets for instrument and lab products sales prospects over the next six months. On a scale of 1 (worsening) to 5 (improving), the environmental market received an average rating of 3.9, the same as in spring 2011 and up from 3.3 in fall 2011. Average ratings for four other end-markets also increased from last fall: food, biotech, agriculture and metals/mining. The largest gain in average rating belonged to the environmental market. This is the third straight survey in which the four top end-markets have remained the same.

The most apparent change among end-markets was the prospects for the energy market, which was the highest-rated end-market in fall 2011 but dropped to the fourth-highest rated this spring. However, its average rating declined from 3.6 to 3.4. The average rating for the food end-market rose four-tenths of a point compared with last fall.

A divide in end-markets prospects is evident, as the four lowest-rated end-markets in fall 2011 remained at the bottom in the spring survey, and the average ratings for each of these markets declined. Academia showed the biggest decline, dropping from an average rating of 2.7 last fall to an average rating of 2.1 this spring.

 Line Graph: Executive Expectations for Instrument and Lab Product Sales for the Next Six Months

 Spring 07 Fall 07 Spring 08  Fall 08  Spring 09  Fall 09  Spring 10  Fall 10 Spring 11 Fall 11 Spring 12 

   0.00     0.04     0.00       0.43     0.33       0.17     0.00      0.00      0.00     0.04    0.11 Decline

   0.58     0.32     0.41       0.35     0.38       0.42     0.28      0.44      0.41     0.44    0.42 Stay the Same

   0.33     0.56     0.59       0.17     0.29       0.42     0.68      0.56      0.59     0.44    0.47 Increase Moderately

   0.08     0.08     0.00       0.04     0.00       0.00     0.04      0.00      0.00     0.08    0.00 Increase Substantially

 

 Column Chart: Ranking of Highest Priority For the Next Six Months

                      Ranked #4   Ranked #3   Ranked #2   Ranked #1

 Developing Countries    29%         23%         27%         29%

 Sales and Mkt.          31%         31%         20%         14%

 Higher Sales Growth      8%          8%         27%         50%

 Op. Efficiencies        15%         38%         27%          7%

 Bar Graph: Avg. Ratings for Instrument and Lab Prod. Sales Growth for the Next Six Months by Geography

 (1=Worsening, 3=Stable, 5=Improving)

 W. Europe       2.1

 E. Europe       2.7

 Japan           2.8

 N. America      2.9

 Middle East     3.0

 Latin America   3.6

 Southeast Asia  3.8

 China           4.0

 India           4.3

 Bar Graph: Avg. Ratings for Expected Instrument and Lab Prod. Sales for the Next Six Months by End-User Market (1=Worsening, 3=Stable, 5=Improving)

 Govt.           2.0

 Academia        2.1

 Elec./Semicon.  2.4

 Chemical        2.7

 Pharma          3.0

 Metals/Mining   3.2

 Agriculture     3.3

 Energy          3.4

 Biotech         3.7

 Food            3.8

 Environmental   3.9