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Early Responders in Top 200 Survey are Surprisingly Bullish in the 2016 Forecasts

May 6, 2016
Judging from 60 early responders to Electrical Wholesaling’s annual survey of the Top 200 electrical distributors in North America, business conditions should improve in the second half of 2016.

It’s been a tough year to forecast sales prospects in the overall electrical market. Pockets of the country like metros in the Atlantic Coast corridor and California’s Bay Area in the Intermountain West are doing quite well, while other regions, like the Gulf Coast and other oil-dependent areas are suffering.

The residential market in general and multi-family housing in particular is strong but outside of the auto industry, the overall industrial market is in slow-growth mode, due in large part to the well-documented decline in the oil & gas market and the businesses that support it.  And while unemployment is down and the overall U.S. economy isn’t awful, manufacturers' new orders for non-defense capital goods excluding aircraft — one of the most important indicators measuring the health of industrial America — are sluggish at best. Throw in the pricing declines in the copper market and other base metals and you can see why forecasting 2016 is such a tough deal.

With their fingers on the pulse of local electrical markets across the country, electrical distributors have a good track record of providing a real-world view of the health of the electrical market. And judging from 60 early responders to Electrical Wholesaling’s annual survey of the Top 200 electrical distributors in North America, business conditions should improve in the second half of 2016. According to a quick tabulation of the early results in this admittedly small sample, 43% of Top 200 distributors are expecting an increase of 5% to 9% in their 2016 sales and 17% are forecasting an increase of 1% to 4%. Surprisingly, 22% of the distributors providing sales data see a sales increase of 10% or more. Only 9% of the respondents see a decline and 7% see their sales as flat.

It’s interesting to note that Electrical Wholesaling’s national sales forecast from its 2016 Market Planning Guide came in at 3.6% increase, slightly under the historical annual growth range of 4% to 8%. That forecast came from a survey done in Aug.-Sept. 2015

Electrical Marketing’s editors also found it interesting that despite the uncertainty over the economic picture, particularly in January when quite a few economic indicators were flashing red, distributors are sticking to their 2016 sales forecasts. Fifty percent of the Top 200 respondents have not adjusted their sales forecasts at all this year, and of those that did, 31% adjusted their forecasts up and 23% tweaked their forecasts down.

Mark Doris, president, Mars Electric Co., Willoughby, Ohio, is expecting a 10% increase in sales and says health-care, senior-living facilities are showing strong growth. “Our market is doing well and we might be gaining share,” he wrote in his response.

Brad McCormick, CEO, Electric Supply & Equipment Co., Greensboro, N.C., is seeing mixed business prospects in his market area and has adjusted his forecast down a few points to -10%. While the tire/rubber market is showing growth in his region, consumer products companies are down. “Customer capital spend was up for 2015. They were choosing to automate the manufacturing facilities,” he said.

One wire and cable specialist said the decline in copper prices and the slowdown in the industrial market affected his company’s 2015 sales. Jeff Siegfried, president and CEO, Omni Cable Corp., West Chester, Pa., said his company has opened a new warehouse in Kent, Wash., but is looking at flat sales growth in 2016 and possibly a slight decline. “Industrial is tough, really tough,” he wrote in the survey.

At least two electrical distributors based in Texas seem to be bucking the trend of slow growth in the Gulf Coast oil patch. One company is looking at a 10% increase in sales and has opened four new branches. Buddy McCulloch, president, Wholesale Electric Supply, Texarkana, Texas, says industrials are showing renewed growth. His company set up new branches in Vicksburg, Miss.; West Monroe, La.; and Gainsville, Texas.

Another Texas electrical distributor appears to be hanging tough in the face of a oil market that he says was hit hard. David Gardner, president, Mission Controls & Automation, San Antonio, Texas, expects his company’s sales to be up 5% to 7% and sees some of this growth from the food and beverage and wastewater treatment segments. The company was also recently awarded Tier 1 status by Toyota.