Based on first quarter results of public distributors and anecdotal evidence more recently, we are in the bottom of the trough in the North American industrial economy. The optimism of a month ago that there was some traction for a turnaround has backed off. Consumer confidence has not been solid enough to trigger production levels again. I’m not expecting Q2 to show a lot of improvement.
That said, the past week has delivered more evidence on the consumer side that confidence is turning around. The Conference Board’s April Leading Economic Indicator Index, released this week, increased 1%, the first increase in seven months, and largest gain in nearly four years. That’s a very important step, along with others, to get back to more stability and then growth, however weak it might be at the start. Throw in the impact of Stimulus spend, an unknown in many sectors, and the last half of the year takes shape to be less painful and the first real stage of rebuilding.
So even though most distributors will look back on the Q1 and Q2 of 2009 as the worst in company history, the good news is that the future is finally coming into better focus. Some industrial and construction sectors that can react more quickly to either initial Stimulus demand as well as early upticks in production will see some improvement in Q3. But August will be a throwaway month for many as plants stay either closed or at minimal operating levels until the demand trend is clearer. Otherwise Q4 will be the turning point for most distributors serving these sectors. The entire automotive and supporting segments might take until at least Q1 of 2010 to sort through that whole pile of debris and start rebuilding.
In fact, I am optimistic in spite of the current pain. The industrial juggernaut that has powered our country for so many decades has crashed with the credit crisis. It now has an opportunity to create better supplier and labor relationships to be leaner and more competitive globally. That sounds like opportunity to me. The relationships Toyota and others have built with suppliers in this country show it is possible.
Finally, I think that American manufacturing, as it has always in its past, will rebuild based on market opportunity, stability and efficiency. It has to be more flexible and productive to be competitive. I believe we will see more near-shore and domestic production as our economy recovers. That’s good for wholesale distribution and the strength of our entire economy.
To help you get a better focus on the second half of this year beyond my hopeful view for our industry, be sure to join me on June 9 for our free Webcast sponsored by Sage with economist Adam Fein of Pembroke Consulting. Adam will detail his outlook based on the latest quarterly data, as well as an update on the economic stimulus package. Register at www.mdm.com/conferences.
“
Time to Look Up and Ahead
Based on first quarter results of public distributors and anecdotal evidence more recently, we are in the bottom of the trough in the North American industrial economy. The optimism of a month ago that there was some traction for a turnaround has backed off. Consumer confidence has not been solid enough to trigger production levels again. I'm not expecting Q2 to show a lot of improvement.
That said, the past week has delivered more evidence on the consumer side that confidence is turning around. The Conference ...
That said, the past week has delivered more evidence on the consumer side that confidence is turning around. The Conference ...
Share this article
- Filed In: Subscriber Only, Research & Analytics, Free, Economic Trends
About the Author
Tom Gale
Tom Gale has been an MDM researcher and industry analyst for 30+ years on independent distribution channel trends, consolidation, technology and competitive landscape. He is a frequent speaker and moderator on these topics at company, marketing group and association meetings in North America and Europe.
Recommended Reading
Leave a Reply
Log In
Read the latest articles and see your reports.
Popular Now
MDM Directories
Sign Up for the MDM Update Newsletter
The MDM update newsletter is your best source for news and trends in the wholesale distribution industry.