The 2020 Mid-Year Economic Update_long

Cautious Optimism Still Dominates 2016 Outlook

Sectors tied to construction, jan-san expect solid growth in 2016.

While 2016 has gotten off to a slow start, there are signs that cautious optimism still exists about the year for distributors. In our annual Distribution Industry Outlook survey, conducted last month, most respondents noted that they expect to have sales growth in 2016, but how positive they feel about it varies widely from sector to sector.

Power transmission and bearings distributors were among the least optimistic, with 38.1 percent expecting sales to be flat or down for the year and another 19.1 percent expecting growth of less than 5 percent. Distributors with close ties to construction markets, including building materials and HVAC distributors, were generally more positive than other sectors. Nearly two-thirds of HVAC and plumbing distributors expect sales growth of more than 5 percent, while 57.9 percent of building materials distributors expect the same.

But the stand out sector in the survey is jan-san. No respondents in this sector expect sales declines in 2016, and only 4.6 percent say sales will be flat. Part of this may also be tied to construction. A new report from commercial real estate search service Reis Inc. found that U.S. employers added 15.3 million square feet of office space in just the last quarter of 2015, more than in any quarter since 2015.

"Demand is really starting to ramp up," said Ryan Severino, an economist with Reis.

Caution still remains, but higher demand for space also means higher demand for maintenance products, including jan-san. It should also support the outlook for distributors in construction-related sectors, particularly later in the year.

Want more on the outlook for 2016? Join us on Thursday, Jan. 21 at 1 p.m. ET for MDM's annual Distribution Industry Outlook. Learn more or register now.

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