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Electrical Wholesaling Expects Industry Growth to Shift to a Lower Gear in 2016

Oct. 23, 2015
Some showcase construction projects are on the drawing boards or breaking ground in markets like New York City, Miami, Boston and San Francisco’s Bay area, but not all cities are sharing in this wealth of construction dollars.

It’s a tricky time right now for economic forecasters. Some regional market areas are white-hot, while others are struggling. The early forecasts for single-family residential construction in 2016 call for impressive double-digit growth on a national basis from a comparatively low level of home-building activity over the past few years, but many metros won’t see anything near that type of residential growth.

Some showcase construction projects are on the drawing boards or breaking ground in markets like New York City, Miami, Boston and San Francisco’s Bay area, but not all cities are sharing in this wealth of construction dollars. And while monthly employment data in construction and manufacturing is still being logged in on the positive side of the ledger, the rate of growth has definitely slowed. For example, year-over-year (YOY) construction employment was tracking above the 4% market each month through most of 2014, peaking at a superb 5.7% in December. It stayed above 5% for the next two months before dropping a full percentage point in March to 4.6%. The preliminary numbers for September came in at 3.1% growth, which isn’t awful — as long as they don’t continue the current downward trend.

Manufacturing employment wasn’t tracking quite as high on a YOY basis, and was in the 1.2%–1.9% growth range for most of this year before dipping below 1% in August. Again, marginally comforting as long as the downward trend doesn’t continue. The chart tracking manufacturing employment over the past 12 months right now isn’t pretty, and the antidotal reports of branch closings and layoffs by national distributors with a big footprint in the industrial market like WESCO and Grainger add to the uneasiness. And other publicly held manufacturers and distributors that focus on the manufacturing segment like Fastenal, ABB, Schneider, Siemens and Eaton have had a rough ride on Wall St. in 2015.

This uncertainty sets the stage for what appears to be a pretty realistic sales forecast by our survey respondents for 2016. Electrical Wholesaling’s editors took the responses from more than 200 executives to develop a forecast for 3.6% national growth next year and an overall market for electrical supplies sold through full-line electrical distributors of $100.1 billion. This growth figure is pretty close to the low end of the historical 4%-8% annual growth range for the electrical wholesaling industry. Once you factor in a point or two for inflation, you are looking at a slow-growth/no-growth scenario for the electrical market in 2016.

While this type of growth scenario won’t wow anyone, you still should be able to find some market segments and regional areas that will shine in 2016, as long as we don’t get hit with some unforeseen financial crisis, dramatic drop in the stock market, or global security issue.