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2019: Will the Road Ahead Take a Turn?

March 1, 2019
Industry execs seem reasonably bullish about their business prospects despite a mixed bag of economic indicators.

One of the best parts of my job is the opportunity I get to travel around the electrical circuit to talk with Electrical Wholesaling readers and advertisers about their business prospects, industry scuttlebutt and emerging trends.

Over the past eight weeks, I have visited with folks at the NAED Western and South Central Regional Conferences; the NEMRA (National Electrical Manufacturers Representatives Association) Conference and the annual executive summit for the National Association of Wholesaler-Distributors (NAW). I found folks refreshingly optimistic about their business fortunes this year, even after the turmoil over tariffs, the government shutdown, and the stock market’s plunge just before the Christmas holidays.

I guess I shouldn’t have been too surprised because Electrical Wholesaling’s readers first voiced their 2019 optimism in the 2019 Market Planning Guide with a +6.1% forecast in sales through electrical distributors this year.

I don’t mean to play the role of the pessimistic donkey Eeyore from Winnie the Pooh, but before we pop the champagne corks in celebration of a banner year, it’s important not to overlook the fact that right now there’s a seriously mixed bag of economic indicators that makes it harder than usual to get a grip on the industry’s economic forecast. Here are three of the more glaring mixed signals:

Electrical Wholesaling vs. DISC forecasts. While EW’s 2019 Market Planning Guide calls for a +6.1% forecast that’s solidly in the middle of the industry’s historical range of +4% to +8% annual growth, the reliable DISC Report published by Herm Isenstein that historically tracks within a point or so of EW’s annual forecast was recently revised downward and now calls for industry growth of less than 2% this year.

A fuzzy snapshot of the construction segment. Dodge Data & Analytics expects total construction for this year to be flat at best. But other construction metrics are singing a happier tune. At 924,900 employees through December, electrical contractor employment has hit some rarified heights it has not seen since 2007. And the Architecture Billings Index published monthly by the American Institute of Architects (AIA) is bullish and said in its most recent report, “Indicators of work in the pipeline, including inquiries into new projects and the value of new design contracts, also strengthened in January.”

NEMA’s EBCI Index. EW’s editors like the Electroindustry Business Conditions (EBCI) survey published by NEMA (National Electrical Manufacturers Association) because it offers a quick read each month of what electrical manufacturers see in the electrical economy. And while the most recent data shows that the EBCI’s current index is solidly in growth territory at 53.3 points (anything over 50 points indicates a growth environment), the EBCI’s future conditions index measuring conditions six months out dropped to 36.7 points, which NEMA said was the “lowest level since near the end of the last recession.”

Score points for news from the Fed and reports from Wall Street, because they both are definitely on the positive side of the ledger. The Federal Reserve’s decision in early January to hold the line on interest rates is sure to help mortgage rates and the housing market this year, and it definitely has already helped the stock market.

And as earning reports roll in, several of the larger publicly held electrical manufacturers and distributors of electrical supplies are forecasting steady growth in 2019. Hubbell told investment analysts it expects growth of +4% to +6% this year; WESCO is looking at growth of +3% to +6%; Rexel sees a more moderate growth range of +2% to +4%; and Grainger’s outlook calls for growth of 4% to 8.5% in 2019.

After sifting through all of the most recent metrics measuring electrical growth and factoring in my conversations with industry executives in early 2019, color me cautiously optimistic about 2019.