The gloom has lifted, according to the latest results of IBO’s Business Climate Survey. In contrast to the fall 2009 Business Climate Survey, conducted in October 2009 (see IBO 10/15/09), when 17% of respondents expected sales to decline in the next six months, not one Survey participant in this spring’s Survey expects sales to decline.

In fact, 68% of the executives surveyed expect sales for the instrument industry to increase moderately in the next six months, compared to 42% who thought the same last fall. Please note that a different set of respondents were used for each survey. Of course, year-over-year comparisons favor sales increases due to last year’s recession, but strong growth in China also appears to be fueling the optimism (see graph, page 4). In addition, stimulus funding and restocking may be driving the brighter outlook. The results of IBO’s spring 2010 Business Climate Survey are based on email, mail, and phone interviews of 25 instrument and lab product company executives conducted in early May. IBO conducts its Business Climate Survey twice annually.

In this Survey, IBO also wished to gain insight into the post-recession recovery of instrument and lab product companies. To do so, IBO asked executives about their companies’ staffing expectations for this year. Survey participants were asked to choose from four possible answers. In accordance with the expected upturn in sales, 56% of respondents indicated that they plan to hire more employees this year and not one company stated that they plan to reduce staffing levels. Thirty-two percent of respondents plan to keep staffing levels the same, and 12% are evaluating the situation on an ongoing basis.

Survey participants were also asked about the pricing environment this year for the instrument and lab products industry in general. Four possible answers were provided. Sixty-four percent of respondents expect pricing to be stable. However, only 8% expect discounting to lessen. These results suggest that the discounts instituted last year to stimulate sales during the recession largely remain in place. However, 20% of respondents expect prices to decline this year. Only 8% of respondents expect prices will increase greater than inflation.

An open-ended question was asked of executives regarding what the lasting impact of the recession has been on the instrument and lab products industry. The greatest number of responses noted that lower prices have been a result of the recession. One survey participant wrote: “Across the industry, the discount pricing put into effect during the recession will remain in effect.” Two other comments were that customers are looking for discounts and that there is price competition. Other respondents cited spending delays or hesitation by customers as an effect. For example, one participate noted, “decisions to purchase take a longer time.” Other respondents cited consolidation as an effect. Several executives emphasized the recession’s permanent negative impact on the industry, stating that a recovery would take several years. One respondent said, “[it] fundamentally changed markets, very lasting legacy,” and another said, “US market has been permanently decreased.”

IBO also asked executives about the effect of US health care reform on their companies’ instrument and lab product sales this year. Asked to chose from three answers, 88% of respondents stated that there would be no effect, with a few executives indicating that there was too much uncertainty at this time to ascertain the effects. Eight percent of respondents answered that it would have a positive impact, with one respondent noting that it would stimulate pharmaceutical company spending. Only one respondent expects health care reform to have a negative effect.

As usual, executives were asked to rate the six-month prospects for instrument and lab product sales in nine regions/countries. Compared to the results of the fall 2009 Survey, the average ratings improved for four regions/countries (China, India, Latin America, the Middle East), declined for two (Japan, Western Europe) and were the same for three (Eastern Europe, North America, Southeast Asia). These results, just like macroeconomic data, suggest that developing countries are driving the recovery, and that China is the main force. The average rating for all areas was 3.3.

Out of the 10 end-user markets about which IBO asked executives for their six-month sales prospects, only two (environmental, metals/mining) had a higher average rating in this Survey compared to last fall. In fact, the average ratings for six markets (academia, agriculture, electronics/semiconductor, food, government, pharmaceuticals) declined. Although no market had an average rating above 3.4, no market received an average ratings lower than 3.0. These results suggest that no particular end-market is driving the sales recovery. The average rating for all markets was 3.2.

Graph: Line Graph

Executive Expectations for Instrument Sales for the Next Six Months

Spring 07 Fall 07 Spring 08 Fall 08 Spring 09 Fall 09 Spring 10

0% 4% 0% 43% 33% 17% 0%

58% 32% 41% 35% 38% 42% 28%

33% 56% 59% 17% 29% 42% 68%

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

Graph: Bar Graph

Average Ratings for Instrument Sales Growth for the Next Six Months by Geography (1=Worsening, 3=Stable, 5=Improving)

Western Europe 2.7

Japan 2.8

Eastern Europe 2.8

North America 3.1

Latin America 3.2

Southeast Asia 3.3

Middle East 3.4

India 3.8

China 4.3

Graph: Bar Graph

Average Ratings for Instrument Sales Growth for the Next Six Months by End-User (1=Worsening, 3=Stable, 5=Improving)

Agriculture 3.0

Pharma 3.1

Metals/Mining 3.1

Elec./Semicon. 3.1

Chemical 3.1

Govt. 3.2

Food 3.2

Environmental 3.4

Biotech 3.4

Academia 3.4