Oil, China & El Nino Delay Recovery - Modern Distribution Management

Oil, China & El Nino Delay Recovery

Trifecta of headwinds push rebound back to second half of 2016.
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Sagging oil prices, China's continued economic woes and El Nino's disruptive weather patterns have downgraded most economic forecasts, according to Alan Beaulieu of ITR Economics, who spoke at the National Association of Wholesaler-Distributors Executive Summit in Washington, DC, last week.

The "economy is in a lull," he said. "It's scary but it's temporary, and it will improve in second half of 2016."

Beaulieu's forecast for a second-half recovery was pushed back from the second-quarter recovery he projected last fall at the Power Transmission Distributors Association Industry Summit in Chicago, IL.

The good news is that consumer confidence and spending are relatively high – "The closer you are to the consumer, the better off you'll be," he said. And the building materials sector remains strong – "All of you tied to housing, you're in for a good year."

The latter is something we wrote about last week. According to the most recent MDM-Baird survey, the building materials & facilities maintenance category produced the top two sectors for revenue growth in the fourth quarter, and the sector is forecast to perform well in first quarter with 3.2 percent revenue growth and also in 2016 with 4.2 percent revenue growth.

In better news – at least for those not tied to the oil and gas market, Beaulieu  noted the vast number of buying opportunities in M&A and advised distributors not to worry too much about China, because "they will be on the right path in a few months."

Perhaps most importantly, however, Beaulieu stressed that the U.S. economy is on solid ground and leads the world – by far – in both production and stability. "We've psyched ourselves into thinking things are worse than they are," he said.

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