The 2020 Mid-Year Economic Update_long

U.S. Census Manufacturers Shipment Data Reveal Key Segments for Distributor Growth

Latest Manufacturers Shipments, Inventories, and Orders Survey shows little growth overall, except for a few categories that continue to rise.
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The latest U.S. Census Bureau manufacturers data confirm that 2019 was a slower growth year for manufacturers and their distribution channels. However, it also highlights some key segments that B2B distributors can focus on to grow above the market in the next year. For more than 30 years, MDM Analytics has been analyzing key economic data to help distributors find growth opportunities.

According to the latest U.S. Census Bureau, Manufacturers’ Shipments, Inventories, and Orders (M3) Survey, overall manufacturer shipments continued to grow in 2019 by 0.6%, but by much slower than 2018’s growth of 7.0%.  Manufacturer shipments especially slowed in the second half of 2019. Durable goods grew by 0.9% while nondurable goods only grew by 0.3%

Durable Goods Growth Opportunities

The key growth durable goods categories that had strong growth in 2019 versus 2018 were:

  • Industrial machinery manufacturing increased by 9%.
  • Nondefense communications equipment surged by 10%. This shows solid, continued growth in the datacomm category.

The one large public U.S.-based distributor that reports a datacomm segment number, Anixter, reported 7.7% growth for Q4 sales in their NSS division in its latest earnings release. The continued growth in datacomm appears to be a strong category for growth potential.

Durable Goods Road Bumps

The key durable goods categories that experienced the largest decline in 2019 versus 2018 were:

  • Nondefense aircraft and parts dropped by -21.1%. Our assessment is this is primarily driven by Boeing’s issues with the 737 MAX, and the trickle-down effect to the supply chain. Unfortunately, those issues don’t seem to be improving as Boeing reported zero new plane orders in January.
  • Mining, oil and gas field machinery manufacturing fell by -5.5%. This key industrial category for B2B distribution had negative numbers in 2019 and, coupled with similar declines in key categories such as metalworking machinery, made growth for many industrial-focused B2B distributors difficult.

Also see: Manufacturing Employment Fell by 12,000 in January.”

Non-Durable Goods Struggle

The largest non-durable product category growth was pharmaceuticals, which grew a healthy 8.1%.

Other large categories such as food and beverages and tobacco had flat growth in 2019.

One of the key non-durable categories for B2B industrial and construction distribution, petroleum and coal, declined -3.1%. This is also reflected in the durable goods mining, oil and gas field manufacturing decline.

At MDM, we predict moderate growth across a number of key sectors and continue to see softness in some key sectors.

We want to hear from you! Please comment below or at john@mdm.com.

John Gunderson VP of Analytics & E-BusinessJohn Gunderson is VP Analytics & EBusiness of Modern Distribution Management – Prior to joining MDM in 2018, John was a senior leader for 20 years leading sales, marketing, pricing, analytics, and ebusiness with companies such as Crescent Electric Supply Company, HD Supply Power Solutions, HD Supply C&I White Cap, Anixter, and EIS-INC a Genuine Parts company.

 

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