In January, when IBO issued its industry forecast for 2012 (see IBO 1/15/12), the industry had just finished two consecutive years of robust growth, which suggested it might be possible for such strong growth to continue. Although at the time we developed the forecast, we did not have the benefit of fourth quarter results for 2011, there were enough indications of trouble ahead that suggested prospects for 2012 would not be nearly as ebullient.

Concerns regarding a double-dip recession had ebbed, and several industries in the US and throughout the world were still showing promise. Still, the industry continued to face a number of problems that could negatively impact its growth prospects, including: the European sovereign debt situation, national austerity programs, the US’s deficit and debt, and the imminent slowing of Chinese growth. These events suggested a cloudy future, which we took into account in developing the forecast.

IBO’s forecast for 2012 analytical and life science instrument industry sales was growth of 5.5%. This was clearly a comedown from the growth of recent years but still respectable. However, it now looks as if the conditions have been even less favorable to the industry, and prospects for 2012 need a reassessment.

Most industry suppliers have reported slower growth of their businesses during the first half of the year. Market conditions overall have deteriorated and, combined with a dramatic change in the exchange-rate situation, depressed revenue growth. As a result, IBO is revising its forecast for 2012 downward to a much-less exuberant 3.2%–3.5% range of sales growth.

Macroeconomic trends have begun to signal that the full year will be a disappointment, and 2013 will not be much better. In May, the International Monetary Fund (IMF) issued its World Economic Outlook forecast that indicates that world output will increase 3.5% in 2012 and improve only 3.9% in 2013; quite a change from the 5% plus predictions of not too long ago. In addition, both the Organization for Economic Co-operation and Development and the IMF expect advanced economies to grow less than 2.0%. The IMF and other forecasting sources project growth in the US at less than 2.0%. The looming year-end “fiscal cliff” only adds to the uncertainty constraining capital spending and expansion. The UK is currently in recession, and the IMF projects its 2012 growth at only 0.2%, while France is rated only slightly better at 0.3% growth. The IMF also projects 5.6% growth for emerging economies, which have become an important source of growth for our industry, down from 6.1%.

Accordingly, on a regional basis, IBO continues to project the strongest growth for China, Other Asia-Pacific and Latin America, although all three regions at two full percentage points lower than in our January forecast. We predict that emerging markets overall will grow about 7.2% in 2012. The US and Canada will likely perform at about the industry average of 3.2% growth, while Japan and especially Europe will be laggards. UK austerity programs, pharmaceutical industry facility closings and the continuing euro crisis will hurt European prospects, and Japan’s recovery from last year’s earthquake and recessionary performance will be slow. The economic and financial difficulties in Europe have also negatively impacted the euro and have been largely responsible for the exchange-rate swings that affect growth in dollar terms.

Sales growth for most analytical techniques has understandably slowed, especially for separations, MS and molecular spectroscopy techniques. Profound changes in pharmaceutical management philosophies related to R&D spending have had a retarding effect on separations and MS, particularly HPLC and LC/MS techniques.

Likewise, reduced funding for government and academic labs has affected demand for NMR and MS. In addition, prospects for the chemical industry have diminished, especially in China and Europe, which will reverse the good times for chemical- and plastics-related techniques, such as GC and thermal analysis. Fortunately, the biotechnology, and food and beverage markets, as well as the CRO sector, are robust.

Sales of techniques in the atomic spectroscopy sector have held up somewhat better due to the strong continuing demand for X-ray instrumentation, particularly X-ray fluorescence and its handheld product segment. However, the other techniques that focus on metals and environmental analysis have been affected by the decline in metal and mineral prices as well as a reduced interest in environmental testing due to slower government funding. Most other techniques are predicted to experience reduced sales growth based on the global economic situation.

The slowdown in 2012 should not be a surprise since two strong years of growth might have suggested reduced prospects for this year. Unfortunately, the intensified difficulties in Europe and the US, coupled with a mild slowing in emerging economies, has led to an accelerated industry decline that may last through 2013.

 Bar Graph: Industry Grows Expectations for Instrument Sales for 2012

 Metals           1.50%

 Chemicals        1.80%

 Academia         2.00%

 Government       2.10%

 Semicon./Elec.   2.20%

 Polymers         2.30%

 Oil/Petrochem.   2.60%

 Pharma.          2.80%

 Indep. Test      4.20%

 Food & Bev.      4.60%

 Biotech          6.80%

 Bar Graph: Regional Growth Expectations for Instrument Sales for 2012

 Europe           1.8%

 Japan            2.7%

 US & Canada      3.1%

 Rest of World    3.2%

 Latin America    4.4%

 Asia Pacific     6.0%

 China            8.2%