2013 Outlook: Modest Growth Likely for Distribution Market


As we move towards the end of the year’s opening quarter, the general consensus is that the distribution market will mirror manufacturing and continue steady if unspectacular growth. In a Wall Street Journal article, economists surveyed by the publication expected the economy to grow by 2.4 percent, the same figure they expected when predicting last year’s growth. While the Commerce Department pegged 2012 growth at 1.5 percent, experts see more supporting strength to this year’s economy.

"We're definitely in a better place now than at this time last year," said Arun Raha of Eaton Corp., who the Journal says was the most accurate individual forecaster last year. Among the reasons he cites for the improved position: domestically, strong auto sales and recovery in the housing market; internationally, renewed vigor in the Chinese economy and signs of Europe moving out of recession.

In Logistics Management, contributing editor Josh Bond agrees that modest growth is likely, but notes lower expectations among respondents to an update of McGladrey’s “Manufacturing and Distributor Monitor”: “While most executives expect some upward movement in key metrics such as net revenue and domestic sales, the percentage of executives expecting increases—and the size of their projected increases—across all key performance indicators tracked by the survey are down significantly.”
Harris Williams & Co.’s “Specialty Distribution Industry Update” calls 2013’s distribution outlook “optimistic.” They cite a PwC report that analyzes the 2013 industrial distribution outlook. According to the PwC report, 83 percent of manufacturers are forecasting revenue growth this year, a strong indicator of returning strength in the sector. “Overall sentiment among U.S. industrial manufacturers regarding the prospects for the domestic economy rose in the fourth quarter along with company growth projections, which trended higher as well,” said Bobby Bono, U.S. industrial manufacturing leader for PwC.
Elsewhere, a Global Purchasing article says that the economic climate has left distributors focused on executing existing market strategies: “Many indicate their intention to stay focused on core competencies in 2013 in the hope that a return to higher growth rates is on tap for the second half of the year. An air of uncertainty still hung in the balance as 2012 came to a close, with global economic and political climates leaving little certainty about where markets were headed.”

In the electronics sector, distributors agree that the industry’s long-term outlook is positive, due to the steady pace of research, development, and design as well as the overall increase in electronic content in all kinds of consumer goods. “Everyone has a different opinion on what’s going to happen in 2013,” says Lindsley Ruth, executive vice president of Future Electronics, to Global Purchasing. ”There’s so much global uncertainty and political uncertainty that it’s tough to predict; but we’re in an investment mode right now on a worldwide basis. Regardless of what happens in the market, we believe we can grow.”
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