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The highlights for the quarter on page three of the presentation. We are very pleased with the strong finish to the year with our fourth quarter results. Local currency sales growth was better than expected as demand in our markets remained favorable and we continued to execute very well.

Total local currency sales grew 8% in the quarter. We had strong broad-based growth in most of our laboratory and industrial product lines. China had another quarter of excellent growth. Our sales growth combined with results from our margin and productivity measures drove very strong improvements in operating margins. And despite a 5% headwind, due to adverse currency and higher tariff costs, we achieved a 15% increase in adjusted EPS in the quarter. All around, these are strong results.

Our outlook for 2019 remains positive, but similar to our comments to you last quarter, we remain concerned about the global economy. We do not see evidence of a downturn in our markets today, but macro data and rhetoric(ph)surrounding international trade disputes make us cautious. We remain focused on execution of our growth initiatives, and believe, we are well positioned to continue to gain share regardless of market conditions. Assuming market conditions remain favorable, we believe we can generate good earnings growth in 2019.

Let me now turn it to Shawn to cover the financials and guidance, and I will come back later with additional comments on our business.

Shawn P. Vadala -- Chief Financial Officer

Thanks, Olivier, and hello, everybody. Sales were $817.9 million in the quarter, an increase of 8% in local currency. All growth is organic, and we have owned Biotix for more than a year now. On a US dollar basis, total sales increased 5% as currencies reduced sales growth by approximately 3% in the quarter.

On slide number four, we show sales growth by region. Local currency sales grew 7% in the Americas; 6% in Europe; and 10% in Asia, Rest of World. Sales growth in China increased 12% in the quarter and was strong in both laboratory and industrial products.

Slide number five shows sales growth for the full year. Local currency sales increased 5% in the Americas; 4% in Europe; and 10% in Asia, Rest of the World. Biotix benefited Americas growth by approximately 1% for the full year.

On slide number six, we outlined local currency sales growth by product line. In the quarter, laboratory sales grew 7%; industrial increased 10%; while retail decreased 6%. Within industrial, product inspection increased 7%, while core industrial grew 13%.

Turning to the next slide, we show sales growth for the full year by product line. Laboratory sales grew 9%; industrial grew 3%; and retail grew 3% in 2018. Biotix benefited lab sales by approximately 2%. All sales growth is in local currency.

Slide number eight provides the P&L for the quarter. Gross margin in the quarter was 58.4% as compared to 58.6% in the prior year. Pricing continues to be a strong contributor to gross margins, but we had headwinds from tariffs, mix and some additional costs associated with our product inspection business and new product launches.

R&D amounted to $36.2 million, which represents a 15% increase in local currency. SG&A amounted to $201.7 million, a decrease of 1% in local currency over the prior year. Increased investments in our field force were offset by cost savings and productivity initiatives, as well as lower variable compensation.

Adjusted operating income amounted to $239.7 million in the quarter, which represents an 11% increase over the prior year amount of $216.9 million. We estimate currency reduced operating profit by approximately $5 million. We also estimate tariffs were gross headwind to operating income by an estimated $5 million. Despite these meaningful headwinds, our operating margin was 29.3%, which is a 140 basis point improvement over the prior year.

A couple of final comments on the P&L. Amortization amounted to $12 million in the quarter. Interest expense was $8.8 million in the quarter. Other income excluding the one-time items I will cover shortly, amounted to $340,000 compared to income of $1.2 million last year. Our effective tax rate was approximately 21.5% in the quarter.

Moving to fully diluted shares, which amounted to 25.5 million -- 25.5 million in the quarter and a 3% decline from the prior year reflecting the impact of our share repurchase program. Adjusted EPS for the quarter was $6.85, a 15% increase over the prior year amount of $5.97.

On a reported basis in the quarter, EPS was $7.11 as compared to $2.93 in the prior year. Reported EPS included a $0.75 acquisition gain related to our earn-out accrual with Biotix. As background, when recording an acquisition with an earn-out provision, the initial amount accrued and goodwill is recorded is based upon Monte Carlo simulation of all possible outcomes. The Biotix acquisition was structured with a large potential earn-out component. While we are very pleased with the Biotix acquisition and expect their operating profit to grow by more than 35% in the first two years, they fall short of the earn-out level. As a result, we recorded a onetime non-cash gain to reverse a significant portion of the original amount.

Other onetime items in EPS include $0.10 of purchased intangible amortization, $0.14 of restructuring, $0.14 of a true-up of the transition tax associated with last year's new tax regulations related to the most current guidance that was published in December, $0.09 of litigation costs and a $0.02 difference between our quarterly and annual rate due to timing of stock option exercises.

The next slide provides full year results for 2018. Local currency sales increased 6%, operating profit increased 12%, operating margins improved 100 basis points and adjusted EPS was up 16%. We are very pleased with these results. That is it for the P&L. Now I will cover cash flow.

In the quarter, adjusted free cash flow was $157.2 million as compared with $130.7 million in the prior year period.

Our working capital statistics remained solid with DSO at 39 days, and IPO at 4.5 times. For the full year, our free cash flow was $455.9 million, which represents a 12% increase on a per share basis. We are very happy with this achievement.

Let me now turn to guidance. First, we continue to feel very good about the things we can control, namely our growth and productivity initiatives. We have spoken to you often about our Spinnaker sales and marketing initiatives, our new product launches and our Stern drive productivity programs. We are confident in the effectiveness of these initiatives and our ability to execute them.

Our guidance for 2019 assumes market conditions remain unchanged. While we ended the year on a strong note as Olivier mentioned, we are cautious on the global economy. Some economic data points are further moderated over the past few months, but we've not seen an impact on our business to date. We also continue to acknowledge risks associated with the potential impact on the Chinese and overall global economy, due to trade and tariff disputes. We will continue to monitor the global economy closely and remain agile to adapt if conditions necessitate.

Next tariffs, based on the situation today, we expect the gross negative impact of tariffs of approximately $25 million on an annual basis. This assumes the full 25% tariff rate, which we assume will be fully implemented in March. We estimate tariffs will be a growth headwind to EPS of approximately 3% in 2019, and will have a greater impact in the first half of the year versus the second half. We expect to be able to negate much of the impact of tariffs through price increases and some internal supply chain adjustments.

One question, you may ask is what happens if the tariffs go away? We would estimate a positive impact to full-year EPS growth of approximately 1%, if the tariffs were eliminated, and this would be on a full-year basis. We would not recruit -- recoup the entire 3%, as some pricing in the internal supply chain process changes are tied directly to the tariffs, and therefore would go away if the tariffs are eliminated.

In addition to tariffs, currency also continues to be a headwind to earnings in 2019, particularly in the first half of the year. For the full year, we would have -- we would expect adverse currency to reduce EPS growth by approximately 1.5%. However, in the first half, it will reduce EPS growth by approximately 3%.

Finally, our tax rate. When we provided guidance in November, we had assumed a tax rate of 21% for 2019. Based on our current expected mix of income, we now expect the effective tax rate for 2019 will be 20.5%.

Let me now cover the specifics. We continue to expect local currency sales growth in 2019 to be approximately 5%. We are increasing our adjusted EPS guidance to $22.50 to $22.70, which is a growth rate of 11% to 12%. This compares to previous adjusted EPS guidance of $22.40 to $22.60.

With respect to the first quarter, we would expect local currency sales growth to be approximately 5.5%, and adjusted EPS to be in the range of $4 to $4.05, a growth rate of approximately 7% to 8%. We would expect the headwind from tariffs and currency to approximately -- to approximate 7% in the first quarter and the first half of the year.

Let me also comment on cash flow for 2019. We expect cash flow of approximately $510 million in 2019. This represents a growth of 16% per share. In terms of share repurchases, as we mentioned on our last call, we intend to modestly increase our leverage over the next two years through share repurchases and/or acquisitions. We currently expect share repurchases to be approximately $745 million in 2019.

Some final comments on guidance as you update your models. Other income, which is below adjusted operating profit will be approximately $3.5 million as compared to income of $6 million last year. This line includes pension income, which we expect will be lower this year. We would expect shares outstanding to be approximately 24.9 million. Interest expense is expected to be approximately $40 million. Total amortization will be approximately $52 million, which includes approximately $13 million of purchased intangible and amortization or $0.40 per share, which we exclude from adjusted EPS.

In terms of currency on sales, we expect currency to reduce sales growth by approximately 2.5% in 2019. For the first quarter, we expect currency to reduce sales growth by approximately 4.5%. We will provide Q2 guidance on our next call, but wanted to point out, given the expected impact of tariffs and currency in the first half of the year as compared to the second half, we would expect EPS growth in the second quarter to be high-single digits. That is it from my side. I'll now turn it back to Olivier.

Olivier A. Filliol -- Chief Executive Officer, President and Director

Thanks, Shawn. Let me start by providing some additional comments on our operating results. Our lab business continues to perform very well with 7% sales growth in the quarter, which was again excellent growth in the prior year. Almost all product lines had good growth with Analytical Instruments, pipettes and Process Analytics particularly strong. We are executing well in this business as we benefit from a robust product portfolio, continued investments in field resources and our Spinnaker sales and marketing initiatives.

Lab will have tougher comparisons in 2019, but we expect good growth nonetheless. I will have some additional comments on lab shortly, but let me cover the other businesses.

With respect to industrial, we ended the year with strong sales growth in both core industrial and product inspection. Core industrial had an impressive growth of 13% with all three regions and most product lines showing very good growth. These results reflect solid market demand and good execution. Product inspection had good growth in the fourth quarter with 7% local currency growth. This business had been under some pressure for most of 2018, due to very tough comparisons and reduced spending by large packaged food companies. We expect growth in 2019 in the mid-single digit range, which is below our long-term outlook for this business as we think it will take some additional time for packaged food companies to return to full investment mode.

The final piece of our company is the retail business, which was down 6% in the quarter based upon the timing of customer activity. Although negative, we are not overly concerned given that we manage this business for profitability, not sales growth. We also expect the sales decline in the first quarter, but expect for the full year that this business is relatively flat.

Now let me make some additional comments by geography. Europe ended the year with strong local currency sales, despite a decline in food retailing. Lab had solid growth, while industrial, both core industrial and product inspection were up strongly. In the Americas, lab had excellent growth. Product inspection was flat, while core industrial was up strongly. Retail was flat.

Finally, Asia, Rest of the World, had another quarter of excellent growth. Lab and industrial did very well, while retail was down. China had very strong growth in lab and industrial.

One final comment on the business in the fourth quarter is service, which was up 9% for the quarter. We had excellent growth in both lab and industrial, reflecting traction on our growth initiatives surrounding service.

That concludes my comments on the different pieces of the business for the fourth quarter. We are very pleased with how we ended the year.

Let me comment in some more detail on our lab business, which has had strong organic growth over the last three years. It now represent just over 50% of our business. We are benefiting from a very robust products pipeline. Lab receives a disproportionate amount of our R&D, and our recent and upcoming launches are yielding very tangible results.

Our Spinnaker sales and marketing approach has worked particularly well for this business, as we very much leverage cross and value selling and innovative marketing that drives leads (ph) growth.

There are also some market dynamics that are very favorable to our offering to the market. One example in the area of data integrity and specifically, how our instrument control software LabX is helping customers ensure compliance and data integrity. Data integrity is one of the most critical topics in the pharmaceutical industry today, and that has become a hot bottom issue with the FDA. In particular, the focus is on benchtop instruments such as balances, pH meters and titrators that do not store data electronically. Such instruments typically use print out of data records, which of course can be subject to manipulation. This risk has gotten the attention of the FDA.

Our answer to this challenge is LabX. Our instrument control and data management software to control benchtop instruments. LabX supports all of our lab instruments, which represents approximately 40% of the instruments on a typical chemists' benchtop. LabX to well-designed workflows, standardization of validation methodology and strong data management capability can help customers achieve their data integrity objectives. LabX can also be fully integrated in a LIMS system. LabX as a fully compliant FDA 21 CFR Part 11 platform, addresses the FDA concerns by providing controlled user access, full data traceability and secure data handling across all of these very commonly used product lines in the analytical testing and QA, QC in the pharmaceutical industry.

In addition, customers enjoy significant productivity improvement as the training burden is reduced as LabX can be standardized across many of these critical benchtop instruments. Most of our balance and analytical instruments are used routinely in the QA, QC or testing lab. With LabX, data analysis and management are seamlessly integrated into one compliant software solution.

One additional market dynamic is productivity and efficiency in the lab and our One Click approach that allows customers to simplify lab processes and ensure they are being done correctly, all with a simple click. The One Click technology incorporates shortcuts, methodologies and sophisticated analytics into an instrument, so workflows can be executed easily and effectively. By combining our One Click approach with our LabX software, our regulated customers can ensure proper method operation and data integrity.

Over the last three years, we have expanded our One Click concept to all of our analytical instruments. We are now taking the concept to our AutoChem instruments. By pairing One Click analytics with our IC software, we are able to use artificial intelligence to provide high-quality information from large amounts of data with limited user interaction.

One benefit is a customer can analyze a reaction in approximately two minutes instead of the two hours, it traditionally would have taken.

LabX and One Click are just two examples of the value that our lab offering provides to customers. We believe our laboratory business is well positioned, and we will continue to focus on five key customer values: safe results; solid compliance; simple operation; sustainable value and seamless integrated processes. We have been incorporating these values into our products for some time, and while these are simple concepts, we believe they resonate well with customers and provide a compass for our development teams to ensure they bring real value, not just technology to customers. That concludes my comments on the lab business.

In summary, we feel very good about how we finished 2018 and our outlook for this year. Assuming market conditions remain stable, we believe we're well positioned to generate good sales growth, capture market share and deliver strong earnings growth.

That concludes our prepared remarks, and I want to ask the operator to open the line for questions.

Questions and Answers:

Operator

Yes, sir. (Operator Instructions) Your first question comes from the line of Ross Muken with Evercore ISI.

Ross Muken -- Evercore ISI -- Analyst

Hi. Good afternoon guys. So maybe just turning to sort of the industrial piece. Obviously, a fantastic quarter, trying to put that in sort of the context of what we've seen on the PMI side, I'm sure you're watching as well, as well as maybe some of the fears in China. I guess, how are you thinking about kind of that core industrial market. I mean, it doesn't seem from the reports we've seen for many companies so far at least in ours -- in this space this quarter that anyone see any change. But I guess as you look at sort of what's happening on the macro, particularly in Europe, maybe lesser in China. How are you sort of putting that full picture together to kind of get a feel for how that business will play out over the year?

Olivier A. Filliol -- Chief Executive Officer, President and Director

Hey. If I look at how we did in Q4, we really saw a very good growth across all the regions. It reflects still good market conditions, but very much also the strong execution of the team. We have invested quite some efforts to go after the attractive segments of the markets. We have done some resource shifts in certain countries, but if I also look at our marketing spending, our sales force guidance, we really support that our focus goes to the industrial segments that are most promising, and here, I would name pharma, chemical and food. And less, so the more discrete manufacturing kind of the material, plastic, electronics components markets. And that gives me also a confidence that in 2019, we still will have good growth even at maybe there is a certain slowdown in the global economy. Our business today is a different one than that we had in the downturn -- in the last downturn, and that's particularly also true for industrial.

Ross Muken -- Evercore ISI -- Analyst

That's helpful. And maybe specifically on China, obviously, some noise today out of the government. But it feels like there's still just a lot of posturing, but will eventually sort of get the tariff issue behind us. I guess, as you look at your business there, any discernible change in sort of growth rates for any of the sub-segments in the region, and how are you thinking about sort of the comps in that business over the balance of the year.

Olivier A. Filliol -- Chief Executive Officer, President and Director

So far we don't see a slowdown in China. We delivered very strong results in Q4. We have great momentum in most of the industry segments. But what I said before for industrial worldwide applies also to China. We -- there are industrial segments that do better than others, again, pharma for example would do very well. And we -- but we would have the material or the discrete manufacturing sectors that are certainly impacted in China. And that's -- a market that today is less relevant for us than it was 10 years ago. We talked a lot about our Chinese market business mix that change. We have today a situation, where the lab business is significanlty bigger than it was a couple of years ago, and even within the industrial business, we succeeded to grow the PI business to become more significant.

So I feel like we have a more healthy business mix, we have a team very focused on capturing the growth that comes from the industry segments that are growing in China, and that are benefiting from the five-year plans of the Chinese government. Looking forward, I don't expect the same growth rates out of China as we have, we rather would see a mid to high-single digit growth in China, here, would see lab to be particularly strong kind of expects from lab in China, high-single digit. And probably on the industry, it's more to low-single digit range. And then reflecting basically also a slowdown of the Chinese economy, not the same in every segment.

Ross Muken -- Evercore ISI -- Analyst

Excellent. Thank you.

Operator

Your next question comes from the line of Patrick Donnelly with Goldman Sachs.

Patrick B. Donnelly -- Goldman Sachs Group Inc., -- Analyst

Great. Thanks, guys. Maybe just on the service side. Another nice quarter of high-single digit growth there. Can you just help us think about the durability of the growth. I know it's been a big focus internally around things like driving higher attach rate. Could you just help us think where we are in that progression? And how much room is left on that front?

Olivier A. Filliol -- Chief Executive Officer, President and Director

Indeed we -- I was very pleased about the Q4 results here in service. It's a good reflection of what we did. It's -- I want to highlight maybe also for the full year. I was very happy with service, because we did talk to you at the investor conference that we -- our products become better and better, and therefore, we sell less spare parts, we have less break/fix and the decline in the break/fix we compensate with higher penetrations for contract business. And we have seen that happening throughout the year definitely also in Q4, I see also that for example, lab service business is doing particularly well, and all these things. So the trend in our service business are all pointing to the right direction, and it's a result of the many initiatives that we have.

I would also highlight that the service in percentage of total business has been grown over all these years, and if I include consumers -- consumables to it, it's today almost a third of our total business. So a very attractive mix, and I'm happy to see that our internal initiatives are actually delivering this.

Patrick B. Donnelly -- Goldman Sachs Group Inc., -- Analyst

Okay. And then you mentioned on the investor day, obviously, you guys spent a lot of time there on the product inspection business. Nice to see that bounced back to the kind of high-single digit growth. I guess on the go forward mid-single digit growth in 2019, why couldn't there be upside there? I know you guys talked a lot about the competitive advantages you have, the opportunity in front of you at the Investor Day. So is it just the market slowing on the food segment, can you just talk through the growth outlook, again, a little lower than we've seen historically?

Olivier A. Filliol -- Chief Executive Officer, President and Director

It's also related to timing of projects, we -- the product inspection business has also deals that are bigger, and then it's a timing question of things, how they come together. Then the second factor is the packaged food industry overall and their investment commitments we had seen in 2017, for example, very good large orders global rollout ,'18 was then slower on that one. And we had certainly also a comparison challenge. And in '19, I just don't see it yet that the large packaged food companies are coming back in the same degree with large global rollout. And that's the reason why we are here a little bit more cautious for the year, but when I think about mid to long-term, I certainly see the product inspection business to come back with very good growth numbers, particularly, we have a very good competitive positions, we have leading positions. And so I really see this as a very attractive business in the long-term.

But then short-term and again 2019, it will be a little more challenging. And yeah, in that sense, I'm happy how we delivered in Q4, but just because we had a good Q4, doesn't make the 2019 here an easy year.

Operator

Your next question comes from the line of Steve Beuchaw with Morgan Stanley.

Steve Beuchaw -- Morgan Stanley -- Analyst

Hi, thanks for the time here. Just a few clean-up questions. I guess one, I wonder, if you could spike out or maybe tell us that -- you have no need to spike out, anything in the quarter, as it relates to timing items or projects, anything that affected the revenue progression 3Q, 4Q, 1Q?

Shawn P. Vadala -- Chief Financial Officer

No, I mean -- Steve, this is Shawn. No, I mean, the quarter first of all was -- we are particularly happy to see broad-based growth throughout most of the businesses. Not only by products, but by regions. Probably the two things that stood out on the positive side, from a trend perspective is we had a strong finish to the year in product inspection that Olivier was just talking about. And then we also had a very strong year in core industrial, which was especially nice to see in each region in the world. I mean, each region really ended the year on a strong note there.

And then on the other side of that, our retail business as expected, was down in the quarter based upon the timing of project activity.

Steve Beuchaw -- Morgan Stanley -- Analyst

Okay, got it. And then just a couple of housekeeping ones. One is, any change to the way you're thinking about the margin impact in '19 from the work that you guys have done on the facility consolidations in Switzerland and around Tampa? And then, and sorry just I wonder if you could give me a sense for how to think about one other issue and it's -- you mentioned in the prepared remarks -- and thank you for the detail that in the scenario, where the tariffs are resolved that the guidance would change, it would go higher. And again, thank you for the granularity. But I'm just a little confused about how to think about that, when, at the same time, you mentioned that you assume that the end market conditions are very stable relative to what you've seen in 4Q and exiting 2018 at least so far, we haven't seen an impact to the tariffs.

So I wonder if you could just help me sort of parse that out. Is the -- is there potentially some impact from the tariffs that you found ways to offset, and so that's kind of net out? Thanks a bunch.

Shawn P. Vadala -- Chief Financial Officer

Yeah, hey, maybe I'll start with the second part of your question, Steve. So just to be clear, when we talk about the impact of the tariffs, we're talking about the direct cost of the tariff. We're not talking about the potential impact on the global economy. And so that's what we're referring to when we talked about in the prepared comments that the gross impact is about 3% of direct costs. But if that went away, the net benefit of going away would be more like 1%.

On the second -- in the first part of your question in terms of product inspection, were you referring to operating margins or gross margins? I wasn't sure what you, what you meant by that?

Steve Beuchaw -- Morgan Stanley -- Analyst

I was actually more focused on operating margins, but both would be -- well, thank you.

Shawn P. Vadala -- Chief Financial Officer

Yeah, sure. So on the operating margin side, we're looking at a 100 basis point improvement for 2019. I think that's a strong guide from our perspective, that certainly factors in some of the benefits we would see from some of the synergies and the benefits we would have from the new facility and consolidating the plants. Similar story on 2019 gross margin, we would see gross margin increasing in the range of about 50 basis points.

Of course, there's different puts and takes to that with favorable benefit from -- I mean, I'm sorry from pricing, which we would expect to be similar to what I guided last quarter in the 2%-ish kind of a range, offset by the cost of the tariffs and kind of the rest is probably noise at that point.

Steve Beuchaw -- Morgan Stanley -- Analyst

Thanks a bunch.

Shawn P. Vadala -- Chief Financial Officer

Yeah.

Operator

Your next question comes from the line of Brandon Couillard with Jefferies.

Brandon Couillard -- Jefferies -- Analyst

Thanks. Good afternoon or evening. Olivier, just back on the core industrial business, the 13% feels a lot more early cycle than late cycle. Were there any specific discrete sort of projects that happened to fall in the fourth quarter that sort of contributed to that?

Olivier A. Filliol -- Chief Executive Officer, President and Director

No, no, no particular. It's -- and it was broad-based. It was across geographies, and so nothing particular that I would highlight and that would explain it.

Brandon Couillard -- Jefferies -- Analyst

Fair enough. And then, just one on the R&D line, the 15% spike in R&D spending in the fourth quarter is a bit of a jump. Just curious how you're thinking about the new product pipeline for '19? And what segments you feel like you've got sort of the strongest lineup? Thank you.

Shawn P. Vadala -- Chief Financial Officer

Yeah, hey. So yeah, we are investing heavily in the business. There's a lot of different and great projects that we're pretty excited about. We see stuff in each area of the business, but if we probably disproportionately in the laboratory side, we have some really exciting things on the Analytical Instrument business as an example. But nothing I would highlight in particular, as you know, we have a pretty diversified portfolio. So no one new product introduction or upgrade moves the needle in isolation. It's just kind of our constant DNA of continuously having these things coming out.

Operator

Your next question comes from the line of Tycho Peterson with JPMorgan.

Tycho Peterson -- JPMorgan -- Analyst

Hey, thanks. A couple of follow-ups on margins. I appreciate the commentary on some of the facility initiatives. As we think about some of the other things, you've talked about supply chain adjustments and then also Blue Ocean kind of being in harvest mode. Can you maybe just talk about the impact from those two dynamics over the course of the year?

Shawn P. Vadala -- Chief Financial Officer

For 2019, you mean, Tycho?

Tycho Peterson -- JPMorgan -- Analyst

Correct, yeah.

Shawn P. Vadala -- Chief Financial Officer

Yeah. Hey, I mean it's not like we have a model that says this basis point is from one thing versus the other, but as you know, we have a lot of really I'd say exciting initiatives to expand the margins. The pipeline of initiatives is as strong as ever. As Olivier mentioned before, we feel really good about the execution in terms of our teams on the different programs, but I would say at all areas, whether it's -- pricing had a particularly good fourth quarter and I feel good about the program entering the year, Stern drive, as you heard at the Investor Day, over 300 projects with lots of good things going on there.

And then, the Blue Ocean program has a lot of really interesting things that we're working on at the moment, that I think also positions us even better for the longer term.

Tycho Peterson -- JPMorgan -- Analyst

All right. And then I guess going back to the industrial commentary. I appreciate the fact you didn't have any kind of meaningful projects in the fourth quarter. Olivier, are you able to talk at all about kind of the order book exit in January or exiting the quarter and then January trends at all?

Olivier A. Filliol -- Chief Executive Officer, President and Director

Not particularly about January. I think the guidance that we provided to you before reflects different early indicators that we have. And you heard Shawn talk about also the business mix that we expect in Q1, and I think(ph)it remains very healthy across all the businesses. So I think that supports that the strong industrial number in Q4 wasn't just a spike. We in general feel good about that momentum, but of course, we recognize that industrial overall is more exposed to an economic environment and that's certainly also the reason that for the full year, I expect a better performance than -- from lab than I would from industrial, but industrial will continue to do well.

Shawn P. Vadala -- Chief Financial Officer

Yeah. And just to be clear, we start the year with a good backlog in Industrial and expect a good first quarter there.

Operator

Your next question comes from the line of Derik De Bruin with Bank of America Merrill Lynch.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Hi, good evening, everyone.

Olivier A. Filliol -- Chief Executive Officer, President and Director

Hi, Derik.

Shawn P. Vadala -- Chief Financial Officer

Hi, Derik.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

So I have to ask another Q4 question on this one, just because some of the other industrial focused companies have mentioned it, did you see any sort of pull forward in demand in Q4 just be from customers in the industrial side, you were potentially worry about tariff and trade issues?

Olivier A. Filliol -- Chief Executive Officer, President and Director

No. Actually, the average transaction size for us is not that high that customers would change their behavior, just because of tariffs or anticipated price increases. Also, we did communicate for example, price increases early on. No, I don't see a connection between the two things, and as Shawn highlighted, that the backlog and indications for Q1 remain solid so.

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Great. And so just one follow-up on this one, one of your life sciences tools, peers when they gave 2019 guidance, they basically said the same, everything looks good, they flagged actually in their comments some concerns over potential Europe. Can you sort of talk about the European market and what's going on, I mean obviously, there is some political uncertainty and employment(ph)right now and just would love some of your feedback, since you're local there?

Olivier A. Filliol -- Chief Executive Officer, President and Director

Yes, of course, Europe is certainly a region that we look at in more cautious way. There are certain countries, where the economic forecasts were downgraded in the last couple of weeks, but that doesn't always mean that it's going to directly impact us. And I strongly feel that for example, the pharma, chem industry is still going very well, and we have a very big share of replacement business, that is not directly linked to the economic environment. I always say to our team, we don't need that strong of a GDP growth that we can actually deliver good growth ourselves. And we are very much in that mode. We are still in an investment mode. We are in an offensive mode across the world, including Europe. And it's up to us to compensate maybe some slowdown in the economy and still deliver good results. And so far, all the indications support the statement.

Operator

Your next question comes from the line of Dan Arias with Citigroup.

Dan Arias -- Citigroup -- Analyst

Good afternoon guys. Thanks. Olivier, maybe on the other side, can you just expand on the Americas in a bit. It sounds like things are pretty good there. And I think Shawn's previous outlook was for growth in the low to mid singles, how likely do you think a 3% or 4% scenario is at this point, you did 5% off of an 8% year. So coming back to 5% as the comp seems fairly favorable.

Olivier A. Filliol -- Chief Executive Officer, President and Director

Yeah, hey, first of all, the environment looks healthy for us, good. I am very happy with the results, the team has been delivering. I am very optimistic that we will continue to execute very well. We have some comparisons topics, where we need to be a little bit realistic, and we have the retail business that we already called out before, we expect a decline. But absent of that, I actually really feel good about the Americas and expect again, particularly lab to do very well also in the Americas.

Dan Arias -- Citigroup -- Analyst

Okay. Retail was actually my second question. I mean, I certainly understand your point on what you're trying to do there in terms of profitability. I was just curious, if you do have a view on when you think that business might return to growth?

Olivier A. Filliol -- Chief Executive Officer, President and Director

I'm not going to forecast too much on that one, because our focus is really on the profitability, and with that, we remain very selective with projects we pursue, it's also a lumpy business and that's why we feel actually that we should deliver flat sales for the full year, but for example, early in the year, we expect we're going to be down. And I'm not -- it's not a business that we're going to say OK, we're going to drive it to low to mid single growth, I actually -- as long as we grow profitability, I'm fine. You need also to know we shift resources. We try to shift resources toward the lab business and industrial business, because we see there a sustainable long-term growth opportunity, we see good profitability.

And when you shift resources away from a business like the retail business, I want to be cautious then to expect growth mid or long term. So yeah, I hope this is giving you the necessary flavor.

Operator

Your next question comes from the line of Jack Meehan with Barclays.

Jack Meehan -- Barclays -- Analyst

Thanks. Good evening. I was hoping, could start just within the lab segment, if you could give us an update on the pharma customer class, 2018 was a strong funding year. So what the outlook there is for that customer group and how -- historically how quickly some of the funding gets deployed within that group?

Olivier A. Filliol -- Chief Executive Officer, President and Director

So let me -- if I take the big picture, I would split pharma and biopharma. Biopharma goes very well. We see a lot of investments -- investment in biopharma, that benefits our core lab and also process analytics very much. We have for example, the pipette business that is very much also in biopharma, we see very good momentum there.

If we look at the other pharma business, so small molecule business for example, we still have very good momentum, and we grow very nicely. But I will also recognize that maybe the investments are not in the same degree as biopharma. But here, we need also to differentiate by geography, you for example have still in the emerging markets, China in particular, a good underlying growth rates in pharma, very much so, and so on a global scale, I feel good about pharma and biopharma going forward.

Jack Meehan -- Barclays -- Analyst

And then just I was hoping you could also give us an update on the deal landscape, given some of the macro uncertainty that you talked about. Has there been any change in activity in the funnel? And as it comes to leverage, just the size of things that you would entertain?

Shawn P. Vadala -- Chief Financial Officer

Yeah. Hey, there is no change in our status. I mean, our pipeline is the same as it's been. We still continue to look at things, but things also have to be available, but no change in our status or our approach.

Jack Meehan -- Barclays -- Analyst

Thank you, Shawn.

Olivier A. Filliol -- Chief Executive Officer, President and Director

Yeah. You are welcome.

Operator

Your next question comes from the line of Dan Leonard with Deutsche Bank.

Dan Leonard -- Deutsche Bank -- Analyst

Thank you. Just a couple of quick ones for Shawn. Shawn, first off, on gross margins in the fourth quarter, they were a little lighter than we were expecting given the outperformance on the revenue line. I know, foreign currency and tariffs were the headwinds, was there anything else to explain the bridge and why gross margins were lighter year-on-year, was there a mix issue or anything else?

Shawn P. Vadala -- Chief Financial Officer

Yeah, I mean, we still -- there's a couple of things, Dan. So we're still experiencing some of these initial start-up costs in product inspection business that we've talked to you about over the last couple of quarters as well as some related new product introductions that we've also spoke to you about as well.

But one thing that stood out a little bit more in the fourth quarter is we did have some negative mix as we kind of dug into that one. And it was kind of just mix that was granular within businesses. It wasn't like this division versus that division, it was really something at a more micro-level. But as you kind of look at some of those topics, maybe the silver lining is that at the operating margin level, those product categories or those businesses actually performed quite well.

Dan Leonard -- Deutsche Bank -- Analyst

Okay. And then just a clarification, for the tax rate in 2019, did you say 20.5% or 21.5%?

Shawn P. Vadala -- Chief Financial Officer

20.5%.

Dan Leonard -- Deutsche Bank -- Analyst

20.5% Thank you.

Shawn P. Vadala -- Chief Financial Officer

Yeah.

Operator

Your next question comes from the line of Daniel Brennan with UBS.

Daniel Brennan -- UBS -- Analyst

Great. Thank you for taking the question here. I ,guess I wanted to go back to China, if you would and with this almost I think 17% of revenues. I'm just wondering, given the exposure you have to core industrial in China, could you just help us think about like what's in that business in China and what the economic sensitivity of it is? Because I think so far labs doing great and most of your peers discussed really not seeing any impact from slowing economic growth there. But I think the uncertainty, if you will, is just kind of the core industrial business. So if you can help us think about the exposure there and the sensitivity that you're baking in, in that business. Thank you.

Olivier A. Filliol -- Chief Executive Officer, President and Director

Yeah. So if I look at the mix today in China, we have about 45% that comes from lab, and then you have industrial, which is roughly 47%. But interestingly, that's quite a change versus 10 years ago, particularly, if I look at the core industrial. Core industrial 10 years ago would have been more like 60%, as today, it is about 40%.

And if I look at this 40% of core industrial, the end user segments would also be different to what we had in the past, namely today, pharma, chemical and food are really dominant end user industries that we are serving. And as you can imagine, these are the industries that are more sustainable, they(ph)should offer very good mid and long-term growth And I would expect them to be much less exposed to any tariffs or trade impact.

And that's actually one of the reason why we feel actually more comfortable that whatever the Chinese economy will do, we will not see the same volatility as we have seen for example in 2015, where there was a significant downturn in China, and we were heavily impacted in our industrial business. Lab had reasonable growth at that time, but industrial was very impacted. But as I described before, our industrial business is today different, and feel more comfortable going forward on this.

Shawn P. Vadala -- Chief Financial Officer

And if you were to take like our laboratory business in China and add the faster growth segments of industrial, it's about two-thirds of our total Chinese business.

Daniel Brennan -- UBS -- Analyst

Great. And then just as a follow up, I'm sorry, it's another kind of macro question, if you don't mind. But just given your comments Olivier, we haven't seen any impact to date, but you're continuing to look at a lot of the tea leaves that are out there and kind of highlight the cautiousness that potentially could occur. So we did take that your guidance for mid-single digit growth this year. And if I look at what IMS is forecasting and who knows if the economists can even come close to being right, but I think IMS and even our firm is forecasting a maybe 0.2, 0.3 percentage point decline in economic growth. Is that what's kind of baked in and what's implying(ph)that, that granular, but is at a level of what's baked in to mid-single digit or is your cautiousness seeing something even potentially worse? Thank you.

Olivier A. Filliol -- Chief Executive Officer, President and Director

No, it doesn't imply something abruptly worse, it is rather a steady situation. And it imply that we continue to execute well in this steady environment and we continue to take market shares. If the economy would take a downturn from the current steady state, I would still expect us to gain market share, but we would probably have a hard time to deliver this kind of growth that we are guiding you. But we don't see in our numbers any early negative indicators and with what the forecasts are out right now from the economists, we feel comfortable with our guidance.

Operator

So our final question comes from the line of Steve Willoughby with Cleveland Research.

Steve Willoughby -- Cleveland Research -- Analyst

Hi, good evening. Thanks for taking my questions. I think two things for you. First, Shawn, you commented about tariffs earlier. Can you just walk us through some of the moving pieces, if tariffs stay at 10%. I know you're assuming that they will go to 25%, but you talked about, if they went away, what happens in terms of the impact or flow through if they stay at the current 10%?

Shawn P. Vadala -- Chief Financial Officer

Yeah. So yeah, thanks Steve for the question. So -- and just to clarify, there's two tranches of tariffs. The first tranche is at 25%. It's the second tranche that started at 10% and is still at 10%. If we look at that and kind of model out what if it stays at 10%, the benefit to EPS on a full year basis would be approximately a 0.5% of EPS as opposed to the 1% if they all went away.

Steve Willoughby -- Cleveland Research -- Analyst

Okay. So following up on that, then just trying to think through the changes in your EPS guidance. Based on my math, it looks like less worse FX is about $0.10, you guided to a slightly lower tax rate, which is about maybe $0.15. And then you previously assumed that the tariffs would jumped to 25% as of January 1st, which obviously hasn't happened yet. So that's some extra earnings here in the first quarter versus what you may -- might have been thinking three months ago. So I'm just trying to put those pieces together and then get to the only $0.10 increase in the full year guidance?

Shawn P. Vadala -- Chief Financial Officer

Yeah, sure. No, I understand the question. Probably, I mean, -- maybe I'll start with maybe the simplest way to think about the guide and then I'll kind of acknowledge some of the puts and takes. So probably the easiest way to look at it as we maintained our growth rate of 11% to 12%.

In terms of like kind of some of the puts and takes, we had our beat for Q4. Yes, we had the tax benefit that you mentioned. On the other side, we also had less pension income for 2019, that's largely related to the lower asset returns that was impacted by global equity markets in the fourth quarter, particularly in the month of December that kind of went the other way on us.

In terms of your comment on tariff delay, I mean, keep in mind that's only January and February that's maybe 2 to 3 pennies. So it wasn't a significant consideration for us.

And then in terms of currency, the currency, you're right, there's probably modest benefit today, if we look at where currencies were three months ago, but a lot of that has been volatility that's evolved over the last couple of weeks. And at this point in time, we just think it's prudent to be a little bit cautious on that one, and we just kind of see how the currencies play out here, and then we kind of update accordingly as we kind of get into the first-- after we get into the first quarter.

Steve Willoughby -- Cleveland Research -- Analyst

Okay. Thank you very much.

Shawn P. Vadala -- Chief Financial Officer

Thank you.

Operator

And there are no further questions at this time.

Mary T. Finnegan -- Investor Relations

Thanks, Katherine. And thanks everyone for joining us tonight. As usual, if you have any questions, don't hesitate to reach out, we are in Switzerland. So please send us an email. We're happy to get back to you. Take care. Bye-bye.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Duration: 61 minutes

Call participants:

Mary T. Finnegan -- Investor Relations

Olivier A. Filliol -- Chief Executive Officer, President and Director

Shawn P. Vadala -- Chief Financial Officer

Ross Muken -- Evercore ISI -- Analyst

Patrick B. Donnelly -- Goldman Sachs Group Inc., -- Analyst

Steve Beuchaw -- Morgan Stanley -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Tycho Peterson -- JPMorgan -- Analyst

Derik De Bruin -- Bank of America Merrill Lynch -- Analyst

Dan Arias -- Citigroup -- Analyst

Jack Meehan -- Barclays -- Analyst

Dan Leonard -- Deutsche Bank -- Analyst

Daniel Brennan -- UBS -- Analyst

Steve Willoughby -- Cleveland Research -- Analyst

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