Despite whispers of a pending economic slowdown, strong revenue growth in the industrial, construction and building materials distribution sectors continued in 2022’s July-September period, according to the Third Quarter Baird-MDM Industrial Distribution Survey, which polled and collected commentary from over 500 wholesale distribution executives nationwide. (Read more in the MarketPulse Baird Survey Report 3Q 2022.)
Overall, distributors posted an annualized growth rate of 9.3% during 3Q, down from 2Q’s 10.4% but exceeding Baird’s expectations by 110 basis points. The survey figures illustrated what many publicly traded distributors and suppliers voiced in their 3Q earnings reports, noting another robust growth quarter, while demand “softening” crept in near its end.
Recent distributor growth in the Baird-MDM survey peaked in 2Q 2021 at 20.3%, a figure that benefited from favorable comparisons to the height of the COVID-19 pandemic’s business impacts throughout 2020. The growth rate decline coincided with the Institute for Supply Management’s Purchasing Managers Index falling another 1.9 percentage points from August to September, with September’s reading of 50.9 narrowly in expansion territory and its lowest mark since May 2020 (43.5) during the height of shutdowns.
The year’s 4Q figures to be another solid revenue quarter for most distributors, when using 2019 (“the last normal year”) as a benchmark, albeit considerably slower than the past 18 months. The distribution sector has been riding high for two years on benefits from pricing, but given the amount of economic red flags out there, it makes forecasting anything beyond 1Q 2023 a tough estimate.