From The Editor

Wholesale Distribution Growth is Slowing

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MCN Editor Dan Markham Wholesale distribution in the United States reached a record $6.01 trillion in 2018, representing 29 percent of GDP. But that up cycle is running out, reports the National Association of Wholesale-Distributors in its recently released State of the Wholesale Distribution Industry report.

“Before we get carried away with the good news, it is important to note that slowing growth is now occurring in the industry and will characterize all of 2019, extending into early 2020. The current 12-month growth rate is 7.5 percent, but the quarterly growth rate is a smaller 4.7 percent, confirming that the industry is on the back side of the business cycle,” writes Economist Alan Beaulieu, the report’s author. Industries in the slowing growth period are described as entering Phase C.

The association said three factors are behind the slowing growth. Retail sales have dipped, and won’t begin to recover until at least the third quarter; nondefense capital goods new orders have likewise moved into slow growth, with downward pressure on capex spending lasting through late this year; and exports, which stopped increasing in November. Distributors will find growth through exports extremely difficult.

Beaulieu says for industries in the Phase C portion of the business cycle, which include metals and minerals distribution, “The ability to anticipate a slowdown in demand will enhance your bottom line and cash flow. This is also a great time to evaluate which products have sold best in previous Phase C situations, and then concentrate your marketing and sales messages on those items.”