Sneak Peek at 2008 Economic Reports
NAW just announced the availability of my new 2008 Wholesale Distribution Economic Reports, which will be delivered in a few weeks. Here’s a sneak peek at the 2007 data and my perspective on the dangerously large growth gaps that have emerged in some large sectors.
Sales of all wholesaler-distributors reached $4.3 trillion in 2007, a 9.2 percent increase versus 2006. Once again, growth in wholesaler-distributor revenues exceeded growth in U.S. Gross Domestic Product (GDP). Growth varied more widely than normal between the 19 major sectors, each of which represents one of the 19 individual 2008 Wholesale Distribution Economic Reports that break the data into 111 sub-sectors. (Click the table below to enlarge it.)
But don’t pop the champagne yet. Many sectors actually experienced low or even negative growth after revenues are adjusted for the effects of price changes. Wholesaler-distributors with exposure to oil, agricultural, and metals prices had the biggest growth gap – the difference between actual revenue growth and real (inflation-adjusted) growth. In other words, total unit shipments for wholesale distributors in some sectors was flat or even down once inflationary trends are stripped out.
A recent Wall Street Journal article highlighted the unsustainable price growth in core commodities such as wheat and oil. (See the charts and analyst quotes in Commodity Prices Surge, As Investors Seek a Haven.) As the article notes: “The price run-ups are leading some analysts to declare bubbles in the hottest markets. That raises the prospect that some commodity prices could come tumbling back down as rapidly as they have risen if they aren't underpinned by genuine demand.”
I describe the implications of this Growth Gap in Chapter Five of Facing the Forces of Change®: Lead the Way in the Supply Chain, the major research study sponsored by the NAW Institute for Distribution Excellence. When (not if) commodity price growth returns to historic norms, the revenue-boosting benefits of product price inflation will dissipate and wholesaler-distributors will have to work much harder for real growth. Until then, enjoy the boom times but be prepared for the day when the bubble bursts.
