The U.S. economy has enjoyed several years of steady if not spectacular growth, but it appears 2020 may be the start of a mild cyclical slowdown for some of the key market drivers that power the electrical wholesaling industry.
The good news is that fears of an imminent recession appear to have died down for the moment. The bad news is the continuing trade war with China and uncertain political climate in Washington have given many businesses the jitters about making major new capital investments.
These macroeconomic concerns impact the electrical market directly. Companies aren’t as quick to build or renovate facilities, and that affects the electrical construction market that accounts for roughly half of industry sales. Add that to an already sluggish industrial market and you can see why some electrical executives have concerns about next year.
DISC Corp.’s Christian Sokoll expects rather modest +1.1% growth for the electrical market, a few points less than EW’s national forecast of +4%, which is based on surveys of our ever-optimistic electrical distributor readers. Construction economists also have some different takes on the construction market for next year. Dodge Data & Analytics is calling for a -4% decline in total construction starts and a -0.5% decline in nonresidential construction. The seven other construction economists that participate in the Construction Consensus Forecast published by the American Institute of Architects (IHS Economics, Moody’s Economy.com, FMI, ConstructConnect, Associated Builders & Contractors, Markstein Advisors and Wells Fargo Securities) are more optimistic in their 2020 nonresidential construction forecasts, which range from +1.2% to a +4.4%.
While it’s always good the get a sense of where the overall market is headed, all business is local and the real story is in what’s happening with local geographic markets and specific business niches of interest. The 2020 Market Planning Guide and our digital version of this resource on www.ewweb.com offer insight into local market conditions. You should also check out Electrical Marketing’s enhanced market data offering at www.electricalmarketing.com, available now for just $99 as part of a special introductory subscription. This data includes quarterly updates of electrical sales potential at the state and metropolitan level; county-level sales estimates updated annually; state-level electrical product potential estimates for 16 product groups; and regularly updated local market data for building permits, population estimates and other metrics.
The following pages provide a nice overview of the key national economic metrics to watch. They paint a realistic picture of an economic environment experiencing a mild decline from several years of steady growth. It’s not as bad of an outlook as some economists were considering just a few short months ago, and it could improve fairly rapidly if the trade concerns with China are alleviated and capital investment starts to flow again.