To say that 2011 was a good year would be an understatement. Somewhat unexpectedly, 2011 results were much better than we could have hoped, given the strong rebound in 2010. So now is the time to look ahead to the coming year and the prospects for the analytical and life science instrument industry. Based on the trends of the last several months, we expect 2012 to be a good year for the industry but less so than either 2010 or 2011.

Last January, we were fairly conservative about the prospects for 2011 since we felt most of the market’s momentum was likely to moderate (see IBO 1/15/11). Our forecast of overall growth of 5.6% was significantly lower than that which was experienced, especially given the strong performance of the industry during the first half of 2011. IBO now feels that the industry expanded 7.1% in 2011 to a total of $42.4 billion in revenues for initial systems, aftermarket and service. Total revenues for 2010 were $39.6 billion.

In retrospect, it is clear what the reasons were for this strong performance in 2011. Most importantly, it was the positive effect of exchange rates, which may have added over 2% to growth in 2011. In addition, economic stimulus programs initiated in 2009 and 2010 had not all been fully reflected in recognized revenues until 2011. Likewise, emerging markets, especially China, India and Brazil, held up better than expected.

Prospects for 2012 will be eerily similar to what we said would be the case in 2011. IBO forecasts that the analytical and life science instrument industry will grow 5.5% to approximately $44.7 billion in 2012; a return to the pre-recession growth of 2008. We expect exchange rates to have a neutral to somewhat negative effect on 2012 revenues as the US dollar holds steady or strengthens against various currencies, especially the euro. Likewise, IBO expects emerging-market growth to moderate but still to outperform the major developed markets. Europe is expected to be the real laggard.

Recently, economic forecasters have suggested that global economic growth will slow to 3% in 2012, as opposed to the generally expected global GDP growth of 4% in 2011 (see page 15). This change, although not trivial, is unlikely to have a major impact on our industry because our end-user markets are not oriented toward personal consumption expenditures.

In general, end-user markets all represent good growth potential. The biotech, food and pharmaceutical industries, and independent test labs, especially CROs, will outperform the market (see page 14); so will government and academia, whose spending will be lower due to austerity programs. Mass spectrometry (see page 6) and surface science (see page 10) will be the fastest growing techniques. However, in every category, certain techniques will exhibit above-average growth potential.

 Bar Graph/Line Graph: Instrument Industry Revenues and Growth

 Year       Revenues(Billions)    % Change

 2006              $34.229          10.2%

 2007              $37.258           8.9%

 2008              $38.899           4.4%

 2009              $37.023          -4.8%

 2010              $39.589           6.9%

 2011              $42.396           7.1%

 2012              $44.725           5.5%