Global Economic Outlook Weakens

Global growth is slowing, according to the International Monetary Fund’s (IMF) World Economic Outlook, released in September 2011. The IMF expected global economic growth to be 4% through 2012, after 2010 growth of more than 5%, and now plans to lower that prediction. In November 2011, the Organization for Economic Co-operation and Development predicted global growth of 3.4% in 2012.

Several executive surveys support this forecast. The results of the December 2011 “Global Business Outlook” survey conducted by Duke University and CFO, which interviewed 1,050 CFOs from public and private firms in the US, Europe and Asia, indicated that CFOs’ optimism had dwindled. The most recent “Pulse: KPMG’s Global Business Outlook Survey,” which surveyed 6,200 firms in October 2011 for a forecast period of twelve months, found that business expectations were lower than for 2011. The KPMG survey assigned net balances for R&D and capital spending in 2012 by subtracting the percentage of respondents who indicated pessimism from the percentage of respondents who expressed optimism. A score of 0% is a neutral outlook. The global net balances for surveyed respondents for R&D and capital spending were 14.4% and 10.5%, respectively.

North America

The Duke/CFO survey of 551 US firms found that participating CFOs expect their capital spending to increase an average of 7.8% and R&D spending to increase an average of 2.9% this year. The December 2011 “CFO Outlook Executive Summary” conducted by Bank of America and Merrill Lynch found that the 600 US CFOs surveyed were less confident about the economy in 2012 than 2011. Thirty-one percent of respondents said that capital expenditures will be higher in 2012, while 41% expected no change, 17% planned to spend less and 11% did not expect notable capital expenditures. In 2012, CFOs at 60% of surveyed firms planned to spend the same amount on R&D as they spent before the recession, 16% intended to spend more and 11% planned to spend less. The KPMG net balances for US companies surveyed for R&D and capital expenditures were 13.5% and 10.2%, respectively.

Europe

According to the Duke/CFO survey of 166 European firms, responding CFOs predicted their capital and R&D spending will increase an average of 0.4% and 2.3% this year, respectively. In the KPMG survey, the results for European firms were net balances of 7.9% for R&D spending and 0.7% for capital spending. For German, UK and French companies, the net balances for R&D expenditures were 9.2%, 10.8% and 1.8%, respectively, and the net balances for capital expenditures were 5.5%, 0% and -7.6%, respectively.

BRIC Countries

The KPMG survey’s overall net balance for R&D spending for responding firms in BRIC countries was 24.5%. The net balance for capital expenditures was 25.9%. In India, the net balances for R&D and capital expenditures were 23.7% and 40.2%, respectively. Chinese companies indicated a net balance of 27.2% for R&D expenditures and 27.9% for capital expenditures. The Duke/CFO survey reported that Chinese CFOs at 102 firms expect to increase capital spending by an average of 9.7% and R&D spending by an average of 12.6% in 2012. The net balances of KPMG survey respondents at Brazilian firms were 17.5% for R&D spending and 16.7% for capital spending. For Russian firms, the net balances for R&D and capital spending were 12.8% and 6.0%, respectively.

Asia

CFOs at 231 Asian firms in the Duke/CFO survey expect their capital spending would increase an average of 2.7% and R&D spending would grow an average of 2.6% in 2012. The net balances for R&D and capital spending at Japanese firms in the KPMG survey were 14.3% and 8.9%, respectively.



Organization for Economic Co-operation and Development 2011 Predictions of GDP Growth, Selected Countries

2011 Chg. 2012 Chg.

OECD Countries 1.9% 1.6%

US 1.7% 2.0%

Euro Area 1.6% 0.2%

Germany 3.0% 0.6%

France 1.6% 0.3%

UK 0.9% 0.5%

Korea 3.7% 3.8%

India 7.7% 7.2%

China 9.3% 8.5%

Japan -0.3% 2.0%

Brazil 3.4% 3.0%


Bar Graph: Regional Sales Growth Predictions for Analytical Instruments Industry in 2012

Europe 3.5%

Rest of World 4.3%

Japan 5.0%

US and Canada 6.0%

Latin America 6.8%

Asia Pacific 8.3%

China 10.5%


Asian Development Bank (ADB) Outlook 2011 Predictions of GDP Growth, Selected Countries

2011 Chg. 2012 Chg.

Central Asia 6.1% 6.6%

East Asia 8.1% 8.0%

China 9.3% 9.1%

Korea 4.3% 4.3%

India 7.9% 8.3%

Southeast Asia 5.4% 5.6%

Japan -0.5% 2.8%

Developing Asia (44 ADB member countries) 7.5% 7.5%
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