Spring 2001 Business Climate Survey: Guarded Optimism.
As has been the case with almost all industries in the past year, analytical and life science instrument companies are feeling some effects of the US and world's economic downturn. But the downturn has yet to put the breaks on instrument indusry growth, and, based on executive expectations, is unlikely to in the next six months. Rather, the economic slowdown has dampened expectations but not defeated them. In fact, many industries would be envious of the instrument industry's healthy state.
But what have been the specific effects of the economic downturn on instrument businesses? IBO surveyed executives about three areas: regional sales, product sales and spending. Overall, executives stated that the current economic downturn has had no impact. With regard to regional sales, only North American sales were negatively impacted, according to a majority of executives surveyed. While a few executives did cite negative and positive effects on other regions, the majority reported no effect. Among the regions where some negative impact was felt were Europe and Japan, while a quarter of respondents reported a positive impact on sales to both Asia and Japan.
Among product sales, the economic downturn has had the greatest impact on traditional and high-end instrument sales. But, again, the majority of executives saw no impact on sales of new products, aftermarket products, life science instruments and lower-priced instruments. Forty-four percent of respondents said the downturn had a negative impact on traditional instruments, and 44% said it had no impact. The results were the same for high-end instrument sales, indicating no clear trend.
It was on instrument companies' spending that the economic downturn has had the most effect. Queried about the impact on six types of spending, the majority of instrument executives reported little impact on R&D spending, hiring and manufacturing. However, the other three areas of spending were negatively impacted. Investments appear to be the hardest hit as 62.5% of executives reported a negative effect, and 56% reported negative impact on marketing spending. Interestingly, 50% of executives each reported negative or no impact on expansion plans.
Although instrument company spending has been affected by the economic downturn, lowered interest rates had only a limited role in stimulating spending, according to the survey. Fifty-six percent of executives told IBO that interest rate drops have had no effect on their companies' investment decisions. This number is surprising considering the deep cuts made in interest rates over the last six months. Seventy-eight percent of executives reported that lowered interest rates have had no effect on sales. Thus current interest rate do no appear to be stimulating capital expenditures for analytical instruments by other industries.
It is safe to say that the macroeconomic situation has affected many industries that are leading purchasers of analytical instruments. Compared to IBO's fall 2000 survey, the average ratings for six-month sales prospects fell for nearly all industries. Industries were rated on a scale of 1 to 5 (1 meaning worsening, 3 meaning stable and 5 meaning great improvement). The pharmaceutical and biotech industries once again were among the most highly rated in terms of six-month sales prospects, although biotech's ratings did slip. Chemicals, which received an average rating of 4 in last fall's survey, received a rating just above 2 in this survey. The electronic/semiconductor industries' rating also fell. However, the rating for environmental testing rose. Average ratings for the government, academic and food sectors remained stable.
While survey results indicate a positive outlook for analytical and life science instrument sales, they also show that the economic downturn has had some impact on the analytical and life science instrument industry. Most notably, the impact has been on North American sales, investments and spending by certain customers. Thus, the guarded optimism that industry executives are displaying may be the most prudent course for now.
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|Publication:||Instrument Business Outlook|
|Article Type:||Brief Article|
|Date:||Jun 15, 2001|
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