The twice-yearly MDM Survey on the Economy was conducted during the last two weeks of August. A similar survey was conducted in February. Here’s what MDM found overall, as well as a breakdown in distributor and manufacturer responses.
Concern over the state of the U.S. economy has grown among MDM readers over the past six months even as more believe conditions may soon stabilize.
Concern over the current state of the economy grew most among manufacturers who responded to the survey, with 25.4 percent saying they were very concerned”and 59.7 percent answering “concerned.”In February, those numbers were 25 percent and 50 percent, respectively.
Distributors showed slightly less concern, with 24.1 percent being “very concerned”and 56.2 percent “concerned”in the August survey.
Overall, 84.1 percent of respondents answered “very concerned”or “concerned”in August’s survey. At the same time, respondents showed less pessimism about the future of the economy than they did six months ago.
Readers who believe the economy will worsen dropped to 28.6 percent from 46.5 percent in February. More than 13 percent believe it will improve over the next six months, almost double from the prior survey.
Though automotive and residential construction continued to be the most cited segments where respondents are seeing slowdowns, more expressed that all sectors are being impacted, especially those tied to consumer spending.
“The closer you get to the consumer, the harder things get,”wrote one industrial distributor.
An electrical manufacturer says: “While residential construction is down significantly, commercial, industrial and the electric utility markets seem strong. This will get us through to 2009-2010 when I anticipate the residential market to return.”
Reality Sets In
In February, a number of respondents believed that any talk of a possible recession would be self-fulfilling.
If the responses to August’s survey are any indication, that attitude has shifted.
Few respondents declared that the economic slowdown was a result of media hype, though there was little agreement on the source of concern.
Some common responses included: increased energy prices, raw material inflation, a weak dollar, the residential housing slump, and weakness in the financial sector, including banks and the stock market.
“I haven’t seen business this bad since 1981,”says one building materials distributor. “Nothing leads me to see a recovery in 2009.”
Some respondents are seeing a silver lining in the slowdown. One manufacturer says: “Slowdowns can help companies rethink what’s important and better plan for the future.”
The Power to Price
Nearly half of respondents believed they would have greater power to increase prices over the next six months. In February, just 35 percent felt they could justify passing on price increases, citing customer aversion.
The difference, according to one JanSan distributor, is that times have changed: “The justification for price increases gains greater credibility and acceptance with each month that passes.”
And it’s not always a choice. Slim margins and increased materials costs have led to significant increases from some manufacturers.
“Distributors cannot afford to absorb the increases from manufacturers,”one distributor says.
Nearly 45 percent of respondents expect no change in the size of workforce at their companies, even though about a quarter of respondents say they are currently considering layoffs as a cost-cutting measure.
More distributors, 31 percent, expect to make an acquisition in the next six months than did in February, when just 20 percent said they had acquisition plans.
Nearly a quarter of respondents are either planning to outsource some in-house functions in the next six months or are beginning to look into the option. Information technology is the most likely candidate for outsourcing.
For an overview of the results in graphic form, download the survey below in pdf.