Q1 2025 sales for electrical, utility and automation distributors who answered the Vertical Research Partners/Electrical Wholesaling quarterly survey on electrical market business conditions were up approximated +2.7%, on +0.4% volume growth and +2.3% of price. The overall result was consistent with the average growth seen in 2024 and the Q 2024 4 exit rate, though the components of growth flipped sequentially with price picking up and volumes decelerating. VRP said in the survey that the general pickup in pricing reflects some early tariff-related movements from OEMs, with another leg higher expected in Q2 2025 as the broader swath of tariffs take hold. Growth in Q1 came in shy of the approximately +5% level distributors were anticipating at the time of our Q4 survey in January. Some distributor contacts called out unfavorable weather in the quarter as a weight on volumes. The two-year growth stack expanded 30 basis points (bps) sequentially to +5.9%.
By category, electrical distributor sales were most robust than sales of utility and automation respondents in Q1 2025, up +5.8% on solid contributions from both price (+2.6%) and volume (+3.2% ). Utility T&D saw modest +1.9% growth driven by 2.8% of price. Automation sales were down -2.5% on soft volumes.
The VRP report said that for electrical distributor respondents, the two-year stack accelerated to +8.5% from the approximately +4.5% range in H2 2024. Results came in broadly in line with the ingoing forecast from distributors for approximately +6% growth. Electrical has the strongest Q2 2025 outlook among categories, expected up +6.7%. We continue to hear of robust data center activity, with distributors describing an almost universally robust demand environment despite the equity market gyrations.
“Tariffs were naturally the key topic of discussion in our conversations with distributors,” said Nick Lipinski, VP and equity analyst for Vertical Research Partners (VRP). “While a few saw activity start to stall intra-quarter or at the start of April, this type of commentary was not universal. Some believe strength seen toward the end of the quarter and the early part of April may have been related to inventory building ahead of tariff-related price increases. Beyond the potential to impact project economics, the administrative effort required to navigate the tax regime is clearly a source of angst. While a degree of tariff implementation was expected following President Trump’s victory in the ’24 election, the scope of the response has been wider than anticipated, and a clunky rollout with several pauses and stutter steps has only added to the confusion and frustration.
“The general view is that, absent a broader resolution to global trade disputes, it will take approximately six months for the tariff dynamics to work their way through the system and enable a return to .business as usual.’ Some level of project slippage seems inevitable but it sounds like there are enough ‘elephants’ to hunt such that 2025 should be relatively insulated. A number of distributors did caution that if tariffs are still in place by the fall, this would meaningfully dampen activity into 2026.”
“Looking forward, distributors are expecting sales up +5.3% on average for Q2 2025. This is similar to the +5.1% growth expected in Q1, which proved somewhat optimistic. We noted at the time that the+ 5.1% average was influenced by a few high-single digit/low-double-digit expectations (median growth was 1.5%) and suspected (correctly) that results would fall somewhere in between the median and the average. The general tone from distributors continues to suggest a strong H2, though tariff friction has injected some risk to the outlook.”
Q1 2025 end-market review. The VRP report said the data center vertical continues to be a primary driver of activity, and is seen as least susceptible to tariff-related pauses or pushouts relative to commercial construction or other industrial end markets. On the energy front, it sounds like renewables (particularly solar) are being deemphasized in favor of LNG projects, though engineering talent is a key constraint.
Skilled labor availability was also mentioned as a gating factor for utility T&D work. Industrial activity remains generally subdued, with some particular indications of softness from Rockwell Automation distributors in the Midwest. The food & beverage industry was relatively soft. Residential construction is being driven by ongoing strength in multi-family housing (outside of California and Illinois). Institutional construction markets are generally solid, with strength in healthcare (hospitals labs) and university spending offsetting a softer K-12 educational end market. Infrastructure investment is supporting strength in water markets. We would note that our polling methodologies of end markets can result in real-time sentiment (i.e. current month’s pulse), versus what actually occurred in the quarter and view these reads as more directional indicators of activity.
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If you would like to participate in next quarter’s EW/VRP survey, contact Jim Lucy, editor-in-chief, Electrical Wholesaling and Electrical Marketing, at [email protected]
