Growth Ahead for Industrial Distributors

Believe it or not, manufacturing appears to be leading us out of the recession. I am raising my forecasts for industrial distribution and now expect year-over-year growth to turn slightly positive in the first quarter of 2010.

Register for a live webinar on November 19, 2009, to hear my economic outlook for 2010 along with my forecasts for all major sectors of the wholesale distribution industry.

Here’s the year-over-year actual and forecast growth in revenues of industrial distributors. Click the chart to enlarge it.

This forecast is driven by the recovering industrial economy. Manufacturing capacity utilization grew at a 7.7% annualized rate in Q3. Even if we exclude the cash-for-clunkers auto manufacturing boost, output rose by still healthy 3.8% last quarter. Nevertheless, we’re still far below the robust levels of 2006-2007.

U.S. exports should accelerate because the rest of the world is recovering faster than us, although the most recent trade data (from August) still shows tepid growth. Industrial distributors selling to export-oriented customers will benefit from the expected return to in international markets.

Exports will be helped by the weakening dollar, which has resumed its slide following last year’s flight to safety during the financial crisis. The Obama administration is supporting—or at least not actively opposing—continued dollar depreciation. The increasingly perilous state of our nation’s finances will likely lead to more dollar weakness.

I’ll provide an update and more details during my November webinar. Hope you can join me!