Industry Logs Highest Revenue Growth in 5 Years - Modern Distribution Management

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Industry Logs Highest Revenue Growth in 5 Years

Is distribution's upbeat fourth quarter sustainable?

2017 ended on a positive note for distribution, as the industry notched the highest average revenue growth in more than five years, according to the most recent MDM-Baird Distribution Survey, Distribution Gains Momentum.

Excluding acquisitions, fourth-quarter 2017 revenues increased 4.9 percent (respondents had projected 3.9 percent growth for the period), the highest average since 7.5 percent growth in the second quarter of 2012. Industrial categories continued their impressive performance while favorable weather helped building materials & construction sectors surpass lower-than-usual expectations.

Revenue growth was fairly balanced across most geographies, and pricing saw yet another increase in 4Q. No sectors recorded negative revenue growth in the fourth quarter; industrial/energy PVF and hoses & accessories led the way with 7.7 percent growth, while datacomm and HVAC were flat

But there is concern that last quarter's impressive feat isn't sustainable. Distributors expect things to taper off in 2018, projecting revenue growth of just 4.1 percent for the first quarter and 4.5 percent for the year.

The struggles of 2016 – especially in the industrial vertical – are still fresh in distributors' minds, and plenty of economists have warned of a slowdown later this year. Despite the measured forecast relative to how well the industry closed 2017, no sectors are projecting a negative first quarter or 2018, offering further proof that confidence is growing, albeit at a modest pace.

The recent tax legislation is one reason for the renewed optimism. There is "overall excitement about the economy and new tax plan has everything moving in an upward, positive direction," according to a respondent in waterworks category. "Projects previously on hold are getting the green light.”

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 fourth-quarter 2017 survey, including results by subsector, in Distribution Gains Momentum.

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