Distributors saw solid revenue growth in the second quarter, but fears over mishandled health care or tax reform – or even diminishing confidence from customers – could quickly halt industry momentum, according to the most recent MDM-Baird Distribution Survey.
Industry revenues averaged 4.2 percent in the quarter, up from the previous quarter's two-year high of 3.4 percent and well above the abysmal -0.2 percent in last year's second quarter. The industry has now recorded two positive quarters in a row, with "good, but not great" a common assessment from the survey results.
"Growth improved slightly vs. 1Q 2017 levels, driven by a combination of improved industrial trends (albeit at a slower pace than prior quarter), and continued solid residential replacement and non-residential construction trends," according to Baird's analysis of the results.
For the second straight period, no sectors reported revenue declines in the quarter, and none project a decline in the third quarter or for 2017 in its entirety.
"After a few years of low or no growth we are seeing a trend toward moderate growth," said one survey respondent in the industrial supply category, while another said there "seems to be a little strength out there, but it's inconsistent."
But what happens in Washington on a variety of policy reform the rest of the year will be paramount for keeping that growth intact, according to one electrical & datacomm survey respondent: "As good as the sentiment is, if nothing gets done on taxes, etc., that's going to hold back some customers from really committing serious capital."
The quarterly survey with Robert W. Baird & Co. included responses from more than 500 distributors and manufacturers in diverse sectors. The survey's goal is to gauge business trends and the outlook for the industry.
Read more about the results of the second-quarter 2017 survey, including results by subsector, in the July 25 issue of MDM Premium.