According to ITR Economics late 2016 and early 2017 will show improvement in the wholesale-distribution sector. Manufacturing is expected to reach its bottom in the 2nd quarter of 2016. With this in mind, it is important to understand that your region of the country and industry will dictate your economic outlook.
For instance, the Ohio Valley region in particular, and much of the country is in an accelerated decline or the ending stage of recession. Some states such as Texas, New Mexico, Arkansas, North Carolina, Illinois, Michigan, Minnesota, North Dakota, Delaware and Florida are in recovery, turning the corner on growth. States like Georgia, Colorado, Arizona, Louisiana, Nevada, New Jersey, Maine, New Hampshire, and Pennsylvania are already on an accelerating growth path.
Also, with the dollar becoming stronger, US exports are more expensive. With imports being relatively cheaper because of the stronger dollar, a distribution company that is importing and selling domestically may have an advantage in the current economy. Export markets are expected to improve later in 2016.
Historically, the US Managers purchasing index has been a nine to fourteen month leading indicator of the US Economy. Based on current information, we should see growth in the last quarter of 2016, using this indicator as a guide. The service sector represented by the non-manufacturing purchasing managers’ index has remained positive.
Other positive growth indicators are related to employment. Employment is up, and the job market is tightening. With these conditions, employers should expect to pay more to hire, and also to retain current employees.
Medical, retail, and financial markets are slowing, but will continue to have growth in 2016. Housing is rebounding, while nonresidential construction is also slowing. Wholesale trade is at the end of a recession, poised to start growing again. Foreign investment is expected to begin its recovery as well.
With these economic changes, wholesale and distribution companies must choose the strategy that best fits the outlook for their region and industry. Opportunities for automation should be considered to reduce or minimize expected increased labor costs. Investments in technology, equipment and inventory should be considered, as borrowing costs are currently low. In summary, wholesalers and distributors should focus on the following strategies and tactics for the rest of 2016 and into 2017:
- Marketing and refining your competitive advantage
- Planning effective growth strategies with regards to your place in the business cycle
- Increasing budgets for people, process improvement, and energy costs compared to 2015
- Making strategic hires for the upcoming recovery phase, but also creating a plan for controlled expansion not overexpansion
If you are interesting in learning more about the 2016 economic forecast for distributors, Barnes Dennig wants to help! Call us at 513.241.8313 or click here to contact us. We look forward to speaking with you soon!