Wholesale Distribution Associations and Professional Organizations

The evidence of a growing economy is straightforward. The consumer is spending money, and on the business-to-business front, New Orders for Durable Goods over the last three months have picked back up to above year-earlier levels. Housing and autos are good examples of the consumer impetus. Housing Starts ended the year 28.1% higher than the year before. We are projecting an 8.9% year-over-year gain in this key industry in 2013. This is great news, and it is consistent with the ongoing solid performance evident in the Light Vehicle Retail Sales trend for 2012, which came in 13.4% higher than the previous year. Additional gains for 2013 are expected here as well (3.3% for the year) with the first half of the year coming in stronger than the second half.

Perusing the leading indicators reveals that many of these forward lookers are faltering in their ascent. One of the most forward-looking indicators, Corporate Bond Prices (Figure 3), is exhibiting 3/12 rate-of-change decline off a September 2012 high, and there is accompanying 3MMA descent. The ITR Leading Indicator has tentatively established an October 2012 peak. The trend input from the S&P 500 is ambiguous. The U.S. Leading Indicator’s monthly year-over-year comparison has also begun to edge downward. The parade of upside-leading indicator news in 2012 is turning into a warning klaxon for the second half of 2013 and into 2014.

Our concern for 2014 is supported by the onset of deterioration in some of the leading indicators as well as changes to government tax and spending policies. The U.S. Congress’ solution to the spending problem was to raise taxes. Raising taxes has the consequence of slowing the rising trend in Total After-Tax Income, which means there is less to spend on just about anything and everything. Wholesaler-distributors who are closest to the retail consumer will experience a slowdown as consumers have less after-tax income. When you couple the higher taxes with higher energy costs and mild inflationary pressures on basic goods, you have the makings of a mild consumer-led downturn in the economy later this year.

No doubt the federal spending cuts slated to begin in 2014 will be headline news as we go through the latter half of 2013. Layer in the potential for having to come off our addiction to stimulative monetary policy (QE3 ending), and it is easy to see that business uncertainty will be ramping up later this year. This uncertainty will manifest itself in a slowdown in business-to-business activity.

Wholesaler-distributors can look forward to another growth year in 2013. Why not use the next three to four quarters of growth to plan for 2014? Evaluate product lines for profitability, explore counter-cyclical industries to expand into, and consider saving cash to help manage the leaner times. Both 2013 and 2014 will also provide aggressive firms with the time to implement efficiency gains in advance of the mild downturn in 2014. A mild downturn means a manageable downturn.

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  • Alabama Wholesale Distributors Association, (205) 823-8544
  • American Wholesale Marketers Association
  • California Distributors Association, (916) 446-7841
  • Colorado Association of Distributors, (303) 690-8505
  • General Merchandise Distributors Council, (719) 576-4260
  • Idaho Wholesale Marketers Association, (208) 342-8900
  • Industrial Supply Association
  • Mississippi Wholesale Distributors Association, (601) 605-1482
  • National Association of Wholesaler-Distributors
  • North Carolina Wholesalers Association, (919) 271-2140
  • Southern Association of Wholesale Distributors
  • Texas Association of Wholesale Distributors, (512) 346-6912
  • Virginia Wholesalers & Distributor Association, (804) 254-9170
  • West Virginia Wholesalers Association, (304) 342-1081