Signs of Economic Growth Emerging - Modern Distribution Management

Signs of Economic Growth Emerging

But are they enough to stem current industrial recession?
Eric-Smith-84x84

Based on recent reports, most notably the latest estimate released by the Bureau of Economic Analysis that showed U.S. GDP increased by 1.4 percent in 2Q, the country might be starting to slowly rise from its collective economic funk.

“Growth is a lot stronger than it looks” based on first-half GDP figures, Scott Brown, chief economist at Raymond James & Associates, told the Wall Street Journal last week. “We’re still seeing a pretty strong jobs market, we expect wage growth to pick up, and gasoline prices are relatively low. That’s all a pretty good backdrop.”

But one quarter of modest growth doesn't necessarily mean better days are imminent – GDP growth for 2016 is still just 1 percent – and distributors are especially wary of recovery talk.

The past year has seen revenue growth across the industry dip, level off and then dip again, all while economists kept pushing back the quarter they projected the climate would improve.

"You should be happier and feeling better about life," Alan Beaulieu of ITR Economics told attendees at the Industrial Supply Association conference in Chicago, IL. But that was in April, and the "good days ahead for the U.S." prediction that Beaulieu made at ISA turned out to be in the distant, not the near, future.

When Wolseley CFO Dave Keltner addressed analysts during the company's earnings call last week, he honed in on the biggest problem facing the industrial space when he said, "The last year has seen an industrial recession in both the U.S. and Canada."

But Keltner along with many economists remain optimistic for a turnaround. "We are starting to see an improvement in industrial … partially due to the markets stabilizing somewhat," he said. "And we would expect to see a better performance this next year, (though) still somewhat weak."

With the third quarter now behind us and a fresh batch of reports sure to follow, we'll see in a few weeks how distributors fared, if the markets are indeed stabilizing and if those good days ahead for the U.S. might finally arrive.

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