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'Election Paralysis' Dampens Latest MDM-Baird Distribution Survey Results

'Election Paralysis' Dampens Latest MDM-Baird Distribution Survey Results

October 18, 2012

The latest results from the third-quarter 2012 MDM-Baird Distribution Survey are out, and while we’re still seeing growth, the upcoming election has put many distributors’ plans for investment on hold.

Forty-four percent of respondents to the quarterly survey said they had deferred business decisions pending the results of the election, including hiring and investment spending, as well as employee compensation.

Respondents explained:

  • “Many customers are waiting to see what happens in November.”
  • “The government needs to provide clear direction for the country to get uncertainty out of the marketplace.”
  • “The economy is in a holding pattern …”
  • “A lot of jobs are pending due to election paralysis.”
  • “It’s probably at least six months before people can get confident – have to deal with the election, fiscal cliff, etc.”

Associate Editor Jenel Stelton-Holtmeier wrote about distributors' top election concerns noted in the survey and talked with distributor associations that are playing an active role in Washington D.C. Read that article here: Top Election Concerns for Distributors - Taxes, Health Insurance & Regulatory Actions

The survey still found growth across most segments, but that growth has moderated with overall third-quarter sales up 4.1 percent for respondents. Revenues are expected to grow 2.4 percent in the fourth-quarter 2012 and 3.6 percent of 2013. That represents lower expectations than we’ve seen in past quarters’ surveys.

Rental equipment, gases & cylinder rental and building materials saw the greatest growth in the third quarter 2012, although building materials growth (5.5 percent) was roughly flat when accounting for price changes (up 5.1 percent).

PVF-industrial & energy, pool & spa and mechanical/power transmission reported the lowest growth rates. Pricing also had an impact on the PVF-industrial & energy segment, as prices fell by 6 percent, according to respondents.

Across segments, gross margins were up by 80 basis points in the third quarter 2012, and pricing up by 1.5 percent.

About a third of respondents increased inventory levels in the third quarter 2012, while a quarter of respondents decreased inventory. The increase in inventory is consistent with seasonal trends, according to the survey, but does indicate some caution. In the fourth quarter 2012, 16 percent expect to increase inventories, with 38 percent planning to decrease.

Thank you to all who participated in this quarter’s survey!

The quarterly survey with Robert W. Baird & Co. included more than 500 respondents in distribution (75 percent of respondents) and manufacturing in diverse sectors. The survey's goal is to gauge business trends and the outlook for the industry.

Read more about the results of the third-quarter 2012 survey, including results by sub-sector, in the next issue of MDM Premium, out on Thursday, Oct. 25, 2012.

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