After a sluggish 2016, construction economists see several pockets of growth in 2017 that should fuel additional construction-business for the electrical wholesaling industry.
While you won’t find many economists who think 2017 will anything more than a year of solid but unspectacular growth, several wild cards exist that could pump up demand for electrical products. If President-Elect Trump’s infrastructure plans make it through Congress with enough spending intact to make a sizeable impact on the overall U.S. economy, it could stimulate spending in the construction market enough to push the 3% or 4% growth expected next year for the electrical wholesaling industry a few points higher.
It will be important to watch the national electrical contractor employment data from the U.S. Bureau of Labor Statistics. Through the summer it had been tracking well above 880,000 — historically a very healthy level — but it dipped below this threshold sharply in September. It’s hard to determine if this will be anything more than a brief aberration or a regular cycle as construction employment typically slows down as winter approaches. In this case, however, the rate of growth of the three-month moving average is headed below the rate of growth of the 12-month moving average, which means the short-term climate isn’t as robust as the 12-month trend line.
It will also be important to see if the surge forecast for single-family housing and decent spending increases forecast for the educational and health-care market segments are a reality next year. If they come through it may make the ordinary year that many electrical distributors, manufacturers, reps and electrical contractors expect into something more memorable. All business is local, and it’s important to consider some regional markets with high-growth profiles (population growth, construction employment growth that tops the industry average, etc.) will track well above the industry averages. In 4Q 2016, these local markets include some metros that seem to make the high-growth lists all of the time, including Metropolitan Statistical Areas (MSAs) along Florida’s southwest coast (Naples and Cape Coral-Ft. Myers); Raleigh, NC; Austin, TX; Nashville; and more recently the South Carolina coast; the Boise, ID, metro; and St. George and Provo-Orem, UT.
When compared with the market drivers in the construction market that could push business to better-than-expected results, on the surface the industrial market doesn’t seem to have the same potential to top 2017 forecasts. Herm Isenstein, DISC Corp., Orange, CT, believes the industrial segment of the electrical market may top 4% growth in 2017 (see “Managing Your Resources in Uneven Markets,” Nov. 2016, p. 32).
All in all, the electrical wholesaling industry has certainly been faced with worse economic prospects. The change in Washington, D.C., injects some additional uncertainty into the economic equation, but if key market drivers outlined on the following pages hold true, we should see some reasonable if unexciting growth.