Judging by the latest wholesale trade data reported by the U.S. Census Bureau, it appears that the long-predicted industrial slowdown — which had continued to push further and further out — has finally arrived.
While publicly-traded industrial, commercial and building supply distributors reported 2Q23 fiscal performance that was largely solid by historical measures, many of them noted signs of a slowdown in their investor/analyst calls between July and August, and the Bureau’s latest monthly Wholesale Trade Report certainly reflected that.
As I’ve provided on a monthly basis throughout 2023, this MDM Premium piece will examine that new trending data as it pertains to wholesale distributors, beginning with full-year revenue expectations for 2023 and 2024.
Distributor 2023-2024 Revenue Expectations
That Bureau data — released Sept. 8 and compiled for MDM by Brian Lewandowski, Executive Director of the Business Research Division at the Leeds School of Business, University of Colorado Boulder — showed a fourth straight month-to-month regression for distributors’ 2023 and 2024 revenue expectations, and by a much steeper decline than movement seen earlier this year.
2023
Reflecting full-year revenue expectations through July 2023, the new data shows that wholesale distributors — as a whole — now expect 2023 revenues to be down 2.1% vs. 2022. That’s a considerable downgrade from the 1.0% decline as of June and 0.6% as of April.
Of the 19 wholesale trade industries that the Census Bureau tracks, 15 moved more pessimistic month-to-month for their 2023 revenue outlook in July; three moved positive and one was flat.
2024
Meanwhile, the overall outlook for 2024 revenues likewise moved more pessimistic in July, with the sector now expecting a 2.7% revenue increase vs. 2023, which is down 0.5 percentage points from the end of June and 1.8 points from the end of April.
Like for 2023, 15 industry verticals moved more pessimistic for 2024 revenue expectations; three moved more optimistic and one was flat.
With wholesale trade encompassing major nuances within each industry, here is how those 19 verticals moved month-to-month for 2023 and 2024 revenue expectations at the end of July vs. the end of June, in order of largest to smallest industry:
| Wholesale Trade Industry | 2023 Wholesale Trade Revenue Expectations through July vs. June | 2024 Wholesale Trade Revenue Expectations through July vs. June |
| Oil & Gas Products Distributors | -2.0% | +0.2% |
| Pharmaceutical Wholesales | 0.0% | -0.5% |
| Grocery & Foodservice Distributors | -0.4% | -0.1% |
| Electrical & Electronics Wholesalers | -0.7% | 0.0% |
| Industrial Distributors | -0.4% | -0.3% |
| Motor Vehicles & Parts Wholesalers | -1.7% | -0.2% |
| Micellaneous Durable Goods Distributors | -2.2% | -1.0% |
| Other Consumer Products Distributors | -0.8% | -1.2% |
| Computer Equipment & Supplies Distributors | -0.6% | -0.2% |
| Commercial Equipment & Supplies Distributors | -0.2% | -0.5% |
| Agricultural Products Distributors | -7.4% | -5.7% |
| Metal Service Centers | -0.4% | -1.1% |
| Building Material & Construction Distributors | -0.7% | -0.7% |
| Hardware, Plumbing & Heating Equpment/Supplies Distributors | +0.3% | +1.4% |
| Beer, Wine & Liquor Distributors | -1.8% | -0.4% |
| Apparel & Piece Goods Distributors | -1.5% | -1.3% |
| Chemicals & Plastics Distributors | -0.9% | -1.9% |
| Furniture & Home Furnishing Distributors | +3.6% | +2.0% |
| Office Product & Paper Distributors | +0.2% | -1.3% |
| Wholesale Trade (All) | -2.1% (-1.1%) | 2.7% (-0.5%) |
Not to pile on to the pessimistic trend here, but these wholesale trade figures correlate to the latest Outlook Survey from the National Association of Manufacturers, which showed that optimism among manufacturers is at its lowest point in more than three years. In its Third Quarter Outlook released Sept. 13, NAM shared that 65.1% of respondents said they felt positive in their company’s outlook, down from 67.0% in the 2Q survey. It was the fourth straight reading below the survey’s historical average of 74.9%.
Monthly Revenues & Inventories Update
The Census Bureau reported Sept. 8 that July 2023 sales of merchant wholesalers — except manufacturers’ sales branches and offices, after adjustment for seasonal variation and trading day differences but not fo price changes — where $648.1 billion, up 0.8% from the revised June level, but down 4.2% year-over-year. The May 2023 to June 2023 percent change was revised from the preliminary estimate of down 0.7% to down 0.8%.
Total inventories of merchant wholesalers were $902.3 billion at the end of July, down 0.2% from the revised June level and up 0.5% year-over-year. The June 2023 to July 2023 percent change was revised from the advance estimate of down 0.1% to down 0.2%.
The July inventories/sales ratio for merchant wholesalers was 1.39, compared to 1.33 a year earlier.
Wholesale Inflation Update
After slowing to a near halt in June, U.S. producer prices have accelerated over the past two months. The Labor Department’s monthly Producer Price Index — shared Sept. 14 — showed that the PPI saw its largest overall one-month increase in over a year at 0.7% in August after rising 0.4% in July. It’s the largest jump since June 2022’s 0.9% increase.
Core wholesale inflation — which removes volatile categories of food, energy and trade services — increased 0.3% month-to-month in August, and increased 0.1% year-over-year.
Employment Update
According to the U.S. Bureau of Labor Statistics, August wholesale employment ticked up 0.08% vs. July (+0.3% in July), and was up 1.2% year-over-year (+1.4% in July).
