The 2020 Mid-Year Economic Update_long

Economist Shares Insights on Tariff, Amazon Impact for Distributors

CU Boulders Brian Lewandowski answers top questions from his recent MDM webcast.

When MDM research partner and economist Brian Lewandowski noted in a recent webcast that the market shows signs of slowing growth, the audience had many questions for him. From ongoing tariff impacts to the Amazon effect, Lewandowski, author of MDM’s Economic Benchmarks for Wholesale Distribution and associate director of the Business Research Division of the University of Colorado Boulder's Leeds School of Business, provides answers:

Consumer confidence still remains high. Is that an indication we might go to a slowdown or slow growth period prior to a recessionary cycle?

We should see a pretty sharp drop in consumer confidence preceding a recession. 

What are you seeing as the effects of tariffs on distributors? 

Given the volume of trade (both imports and exports), tariffs are expected to have a negative impact on wholesale distributors especially in the short run, as wholesale distributors adapt to price changes and pass along price increases to customers. As well, wholesale distributors may be impacted by a lower volume of trade (i.e., fewer sales). 

What are your thoughts on a manufacturing recession over the next 12-24 months — outside of the service-based economy?

Though decreasing, the ISM manufacturing index is still positive. Manufacturing employment, both in durable and nondurable goods, continues to grow year-over-year. Despite these generally positive signals, manufacturing will be impacted by the trade situation, the late business cycle (e.g., auto purchases), and unique factors (e.g., Boeing). As well, manufacturing faces long-term structural headwinds, and we may see more automation substituting for employment. 

Regarding employment growth, do you have any insight regarding the industries driving the growth rates, headwinds, tailwinds, etc.?

The great number of jobs have been added in healthcare; accommodation and food services (i.e., hotels and restaurants); professional, scientific, and technical services (i.e., engineering, R&D, etc.); and administrative and waste management. These are also among the largest industries. 

How will Amazon impact the trends of what is flowing through traditional wholesale distribution? 

I think Amazon and ecommerce in general has the potential to dramatically disrupt the status quo in wholesale, exposing some obsolescence in some of the supply chain. 

Missed the webcast? Listen to a replay of the 2019 Midyear Economic Update here.

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