Happy New Year—I think

It's a new year and I just finished proofing the ILS Annual Economic Review, which you will be able to access in a few days. I labored over the analysis right up to the production deadline because the world economic situation, to put it mildly, is very fluid.

First, the good news. The US is doing all right, even though we are holding our breath to see what mischief the new Congress might get into, like not canceling some of the sanctions that have been in place with our neighbor 90 miles to the south.

I have been touting the US manufacturing and export situation for lasers all last year and have only begun to have second thoughts, as the end of the year brought developing news that exports to our major customers overseas might slip and the lofty dollar might prove to be a two-edged sword and hinder continued growth prospects. But on the premise that any change would mean a slightly lower growth rate, I acquiesced and kept the US in the win column.

I had the UK in the win column, mostly on widespread news that manufacturing there had surprised all by doing much better than expected. I even comment on this in the Annual Review. Much to my chagrin, the UK government did a 'nevermind' and unashamedly advised us that theory was wrong and all was not tea and crumpets.

Now, to the loss column. At the close of 2014, China—the world's largest industrial laser market—was in the throes of unsuccessful government efforts to plug, with selective stimuli, a leaking economic boat and to endorse exports to the global markets to be served by companies with domestic intellectual property products. And the government sanctions on well-placed individuals chilled the luxury goods markets, such as the top-of-the-line auto industry.

A down market in China had immediate effects in Europe—a major exporter of laser products—which contributed to almost-recessionary problems in Europe. A downward shift in growth rate in Germany—a global industrial laser export market leader—precipitated by the Ukraine crisis caused manufacturing to decline precipitously in the last months. Still positive, but not enough to boost Eurozone financials that were headed for a measly 0.8-percent growth at the end of the year, thanks to ennui in Spain, Portugal, France, Italy, and Greece. Eastern and Central Europe, which were expected to be active markets for lasers, were not, as economic woes hit all the included countries. Even Turkey, outperforming other developing nations, saw the laser business slow as their export markets slowed.

Among the non-aligned industrialized BRIC nations: Russia, which had been projected to be a bright spot in 2014 capital equipment sales, returned to a bully-on-the-block posture that turned the rest of the world’s majors against it with economic sanctions. The other BRIC nations did not deliver. Brazil, still sorting out political unrest, was negative; India started an end-of-year turnaround led by auto sales—perhaps too little too late to pump up overall revenues; and, for the first time in recent memory, China's manufacturing PMI went below the magic 50 level in November.

Asia—less China—was not much help, as the government of Japan, desperately trying to stave-off inflation and unemployment by calling a snap election, had another political change of direction, slowing investment by laser systems suppliers and their domestic customers. And the potential of the Asean nations to, as a bloc, compete with China did not happen.

I started 2014 thinking the total industrial laser market would grow about 5 percent. I would have nailed this if it had not been for the strength of fiber lasers, which, producing great revenues, boosted the total market up to 6 percent for the year. As for 2015—well, you’ll have to read about it in the January/February issue of ILS.



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