Next Year Will Surely (Hopefully?) Be Better Than 2020

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Next Year Will Surely (Hopefully?) Be Better Than 2020

MDM has compiled some recent economic outlooks for 2021, most of which are promising, but we’d love to know what you expect for your distribution business and the industry as a whole next year.
2021 Economic Forecast blog

We’re in the home stretch of 2020, which can’t end soon enough.

Now that the year from hell is almost behind us, the question remains: Will 2021 be the year of redemption that everyone hopes it will be? After all, a coronavirus vaccine should be readily available, lockdowns should end for good and the economy should not only recover but return to its pre-pandemic trend of steady growth.

A few hurdles, however, threaten to dash our collective hopes. The aforementioned vaccine will take months before it’s widely available, Congress has reached a stalemate on an economic stimulus and Washington could find itself further divided following the Jan. 20 inauguration.

All this being said, most reports have forecasted economic improvement in 2021 — because it can only go up from here. Right?

Here are a few of the better-known prognosticators that have made upbeat projections for the U.S. and global economies next year.

  • In its 2021 forecast, Morgan Stanley projects strong global GDP growth of 6.4% for 2021. The firm expects emerging markets to lead the way “followed by reopening economies in the U.S. and Europe.” As for the U.S. forecast, in particular, Morgan Stanley writes: “The U.S. economy, for its part, has stayed resilient through the pandemic. Consumer spending has nearly returned to pre-COVID-19 levels, while average personal incomes of U.S. households surpassed pre-pandemic levels in September, even after the first round of fiscal support expired. These and other factors suggest a sustainable U.S. recovery, even amid a difficult winter, with projected GDP growth of 5.9% in 2021.”
  • The Conference Board writes of 2021: “While the economy has partially rebounded from a deep contraction in the first half of 2020, a variety of factors will determine how the recovery unfolds in 2021. Key variables include: a) the scale of the ongoing COVID-19 resurgence and any resulting lockdowns, b) the status of labor markets and household consumption, c) the size and timing of additional fiscal stimulus, d) the timing and availability of a COVID-19 vaccine, and e) the degree to which volatility in the US political transition affects consumer and business confidence.” Click this link to read The Conference Board’s three scenarios: “Best Case,” “Upside” and “Downside.”
  • And in a recent blog, ITR Economics’ CEO Brian Beaulieu (you know him and his twin brother Alan, both of whom speak at numerous distribution association conferences) wrote this: “The shape of the recovery in your business is first and foremost a function of the decisions that you make. Ultimately, it is not up to the federal government, state/municipal governments, or COVID-19. However, these three influences must be considered to varying degrees based on the nature of your business. We are going to take a look at some state influences. Perhaps they won’t impact your business directly, but they could have a bearing on your finances and the economic well-being of your community.” Click this link to read Beaulieu’s breakdown of where the GDP hit was the worst and which states are better positioned to ride through the economic storm.

But What About Distribution, Specifically?

That forecast from The Conference Board — specifically its three scenarios, which depend on how certain events unfold — is reminiscent of MDM’s forecast for 2021.

As we wrote in late October for our Quarterly Markets Forecast, “MDM’s baseline annual forecast for 2020 for the wholesale distribution industry is for a 5.6% decrease from 2019, with a snapback in 2021 to a baseline estimate of 7.5% growth.” But again, there are pessimistic and optimistic scenarios that vary widely from the baseline estimate.

As for our most recent MDM-Baird Distribution Survey, also published in October, respondents said they forecast only a 0.9% average industry growth in 2021 despite a favorable comp with 2020.

Baird 2021 estimate

We are in the process of gathering intel on how the distribution industry now thinks it might fare in 2021. We have recently emailed our Industry Outlook survey, but if you didn’t see it, we’d love to get your predictions for 2021.

>Click here to access the survey<

The results will help to guide MDM’s content in 2021. They will also be prominently featured in our January webcast on the 2021 economic outlook and trends shaping distribution.

In the meantime, MDM will have much more on the outlook for distribution as 2020 mercifully draws to a close and as 2021 kicks off. Our Industry Outlook Webcast will be held in January. And we’re also hosting a Distribution M&A Virtual Summit in February that will examine the current landscape for M&A and best practices for buying or selling a company. Look for more on this event, as well as a preview of distribution M&A activity on the MDM Blog next week.

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