Regional Forecast: A Two-Horse Race—China and the US
This year, instrument sales-growth potential by geographic region differs significantly. China leads the pack with solid growth, albeit tempered by external influences and government policies. The US and Canada are a bright spot as the largest market, expanding over 5%. US economic improvement coupled with lower energy costs makes this an enviable market. India should experience stronger growth under a more business friendly government, while Other Asia Pacific will perform well, though at a reduced level. Europe will remain stagnant, and Japan will underperform due to exchange issues, despite government stimulus. Latin America, particularly Brazil, will be a laggard due to economic difficulties arising from reduced commodity exports, while Rest of World, especially the Middle East, will suffer from lower oil revenues.
Worldwide economic growth was slow in 2014, and the International Monetary Fund (IMF), Organization of Economic Co-operation and Development (OECD) and the World Bank predict the same in 2015. This month, the World Bank cut its growth prediction for the year due to slower-than-expected 2014 growth (see table).
The OECD, in its November 2014 Economic Outlook, revised numbers (see table) from its October 2014 update (see IBO 10/15/14). The IMF forecast (see table) was released in October 2014. A November 2014 survey of 1,474 executives by the Economist Intelligence Unit found that 51% of them expect business conditions to improve for their companies in 2015, while 10% believe that they will worsen.
The December “Global Business Outlook” by Duke University and CFO shows that CFOs surveyed from 517 US firms expect their companies’ R&D spending to increase 2.5% over the next 12 months, on average. They expect capital spending to increase 5.9%, on average.
For the CFOs at 40 Chinese companies, R&D and capital spending, on average, are predicted to rise 4.9% and 6.3%, respectively.
The CFOs from 159 European companies surveyed expect R&D and capital spending for their companies, on average, to increase 1.5% and 4.2%, respectively.
R&D at the companies of 131 CFOs from firms in Asia, excluding Japan, expect R&D and capital spending at their companies to increase, on average, 5.9% and 8.9%, respectively, in the next 12 months.
The CFOs surveyed from 39 Japanese firms expect average increases in R&D and capital spending of 5.4% and 4.2%, respectively, over the next 12 months.
The CFOs of the 159 Latin American companies participating in the Duke University survey expect average R&D and capital spending over the next 12 months to increase 3.5% and 2.0%, respectively.
The 43 CFOs surveyed from Brazilian firms predicted a 3.5% rise in R&D spending and a 4.4% fall in capital spending, on average.