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Balancing Economic Expectations vs. Results

Balancing Economic Expectations vs. Results

July 3, 2017

With last week's news that U.S. GDP increased at an annual rate of 1.4 percent in the first quarter, according to the third estimate from the Bureau of Economic Analysis, signs continue pointing toward recovery. But can the economy match distributor expectations for the rest of 2017?

First-quarter GDP growth wasn't the only positive indicator. The U.S. saw a boost in consumer confidence and positive results from associations such as Heating, Air-conditioning and Refrigeration Distributors International and Industrial Supply Association. These results mirror the most recent MDM-Baird Distribution Survey, which showed that industry revenues averaged 3.4 percent in the quarter, their highest level in two years.

Distributors expect more of the same moving forward. Survey respondents projected revenue growth of 3.8 percent for the second quarter and 3.7 percent for the year. “Looks like we’re turning a corner, but no one’s popping Champagne yet,” is how one respondent described the current climate.

As health care reform stalls, tax reform gets pushed back and President Trump attacks news organizations on Twitter instead of focusing on policy, doubts remain that conditions will improve beyond the expected bump that has already occurred.

“Confidence is higher, and I expect an uptick in business, but remain dubious about the quality of our national leadership,” said a 1Q survey respondent in electrical & datacomm. “I do worry that this mood could be overwhelmed if the faith in our leadership wanes.”

Indeed, a number of economic reports in recent weeks have shown decreases that more directly impact the distribution industry, including the Chicago Fed National Activity Index, new residential construction permits and cutting tool consumption.

As we enter the third quarter, look for the next crop of economic reports to provider a better indication of the country's fortunes. Results of the next MDM-Baird survey will be published in the July 25 issue of MDM Premium.

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