The 2020 Mid-Year Economic Update_long

Sneak Peek at 3Q Distribution Survey Results

Where did distributor revenues land in the third quarter? What’s the outlook for 4Q and beyond? We answer those questions and more in this preview of the latest MDM-Baird Distribution Survey — and the results might surprise you.
MDM-Baird Distribution Survey 3Q 2020

It appears the third quarter wasn’t as bad as many thought it would be. Distributors posted an industry average of –3.2% growth in the period, according to the latest quarterly MDM-Baird Distribution Survey.

Though still negative, that’s a significant improvement from the disastrous second quarter — the height of the COVID-19 crisis — when distributors posted an average decline of –9.8%.

“Third-quarter survey data showed a moderately better-than-expected sequential recovery, with building products providing most of the upside,” wrote Baird analyst Dave Manthey. “However, several hard-hit industrial supply categories rebounded sequentially. Looking forward, industrial supply distributors forecast a continued gradual recovery into 4Q20 but are initially cautious on 2021, while building products distributors forecast modest y/y growth in 4Q20 and 2021.”

Another nugget from the report: Pricing turned positive (+110bps y/y) after last quarter’s deflationary reading, although pricing across certain categories (cutting tools and fasteners) continues to be lower, Manthey wrote.

These stats are just a sneak peek from the latest Baird-MDM Distribution Survey — look for much, much more in the Oct. 25 issue of MDM Premium — but these data points speak to an important trend as the country continues to navigate the pandemic: While not every report is upbeat, there has been plenty of encouraging news to kick off October.

  • Distribution M&A activity has accelerated in the first week of the month and quarter, with deals already from Endries International, Applied Industrial Technologies, Winsupply, SiteOne Landscape Supply, BlackHawk Industrial, Brady, Heritage Landscape Supply and Emerson. This link will take you to all of our M&A news.
  • Indian River Consulting Group’s (IRCG) weekly Pandemic Revenue Index for the workweek of Sept. 28 to Oct. 2 indicated a 4.8% increase compared with the same week a year ago. Seven of the last 10 have shown an increase, albeit some were very small bumps and some increases were the beneficiary of a favorable comp with 2019.
  • And the seasonally adjusted Fastener Distributor Index (FDI) for September was 52, up from 49.2 in August, according to the latest analysis from Baird, FCH Sourcing Network and the Institute for Supply Management. The Forward-Looking Indicator (FLI) also improved, up to 60.6 from the ~53-54 range of the past several months.

Fourth-Quarter Expectations

As I wrote earlier this week, the fourth quarter got off to a rocky start with the president’s COVID-19 diagnosis rattling the markets and consumer confidence. What’s more, we’ve seen a couple of less-than-enthusiastic reports, endured ongoing disruption due to the pandemic and wondered about the outcome of a contentious presidential race.

So we polled our audience on LinkedIn about how they project the markets to perform in 4Q. Nearly half (48%) of about 30 respondents said they expect “flat” growth in the quarter, while 31% expect “strong or moderate” growth and 21% expect “strong or moderate” decline.

Respondents to the MDM-Baird Distribution Survey agreed, forecasting a slight sales decline of –0.3% in the period and a 1% increase in 2021. Look for more specifics in the Oct. 25 issue of MDM Premium.

In the meantime, if you’re not already, please consider becoming a member of our LinkedIn group, Modern Distribution Management’s Independent Distributor Network. There, more than 10,000 professionals in the distribution, manufacturing and consulting fields are sharing relevant articles, best practices and questions for the community.

In the coming weeks, you’ll see even more engagement from the MDM team, so be on the lookout for some lively conversation around the issues affecting the wholesale distribution channel.

And, as always, feel free to reach out with your thoughts on how business is going and the unique ways your company is adapting to this strange new world. Drop the editorial team an email at editor@mdm.com.

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