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tED Magazine Research Shows Economic Strength Remains

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tED Magazine Research Shows Economic Strength Remains

Despite talk of a potential economic downturn, members of the National Association of Electrical Distributors are reporting strong second quarter results, and a positive outlook for the rest of 2019.

tED magazine’s exclusive economic research with R.W. Baird shows distributors saw a 2.3% year-to-year increase in revenue for electrical sales, and a 3.4% increase in datacomm for the second quarter of 2019. It marks the 9th consecutive quarter with a year over year revenue increase.

Distributors told researchers they are seeing some positive signs from commercial construction, commenting:

  • “Still experiencing solid growth in non-residential construction.”
  • “Historically strong construction.”
  • “Non-residential construction pricing up due to season demand at a rate 2-4% above the same period last year.”
  • “Our business has been very strong YTD in 2019 and we see no reason why it will not remain robust for the remainder of the year.”

Meanwhile, the demand for industrial products slipped in the second quarter of 2019, after seeing positive signs earlier this year. Some of the comments to Baird researchers include:

  • “Industrial a little flat.”
  • “OEM business seeing decent strength, but (fewer) industrial projects.”
  • “We see an active market that has been slowed by tariffs and weather.”

As far as an outlook for the rest of 2019, the NAED distributor-members who responded to the Baird survey said they expect to see a 3.1% increase in revenue for electrical in the third quarter of 2019 when compared to revenue for the third quarter of last year, and a 2.9% increase in revenue for datacomm.

Respondents say that while backlogs were larger last year at this time, they are still seeing some positive signs from commercial construction.

  • “April and May were strong followed by a much weaker June. Seems to be project timing as the outlook for 3Q still remains positive.”
  • “Our construction backlog is a under the growth of our overall backlog.”
  • “Large project bids began to drop off noticeably. Short term backlog is above capacity and long lead times are causing cancellations.”
  • “Our bookings and projects going into 2019 decreased compared to 2018, but strong backlog for 3rd and 4th quarter.”

Meanwhile, responses from the survey show attitudes about industrial trends remain mixed.

  • “Revenue growth is slowing as market uncertainty has crept in.”
  • “Difficult to predict. The uncertainty is clearly a headwind.”
  • “Trending slightly upward, but feeling pressure on supply and some concern with the changing tariff environment is probably slowing the economy a bit more than is realized today. Uncertainty the driving force for the slowdown.”

Despite the uncertain comments, the responses show there is still plenty of optimism about the overall economy. tED magazine asked respondents “What is your near-term outlook for the overall economy?” Half of the responses were “growth”, and 44% expected to see the economy be “flat”. ┬áJust 6% saw a “recession”.

tED magazine also asked NAED business executives if they approve or disapprove of how the Trump administration is handling the economy. 61% of the respondents either “strongly approve” or “approve” of the handling of the economy, while just 23% either “strongly disapprove” or “disapprove”.

As you might expect, the comments on the handling of the economy were either extremely favorable, or somewhat negative.

  • “I believe the President’s stance regarding tariffs will help the economy over the long run.”
  • “China has been a bad actor on the world stage with currency manipulation, intellectual property theft, and egregious human rights violations. We will be better off if we have more equitable sustenance with China where we are in a better trading position with them.”
  • “I’m hoping his strategies eventually drive more manufacturing jobs back to the U.S.”
  • “His negotiating tactics wreak havoc on the day to day economy. He should talk less and do more.”
  • “The consistent changing of strategies relative to tariffs makes it difficult to know what is happening or invest in a longer-term strategy.”
  • “Our deficits are out of control and our entire government is kicking the can down the road. The longer we push off tackling this issue, the greater the cost to the economy.”

Baird received 125 responses to the 2Q economic survey. The respondents’ companies have combined revenue of more than $25 billion. The responses were spread fairly evenly, with 22% of the responses from the Northeast, 26% from the Midwest, 19% from the South, 18% from the West, and 15% international.

Find the results of the Baird research report in the October 2019 issue of tED magazine.

 

Tagged with
Scott Costa, Publisher, tED magazine

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