4Q23 MarketPulse: Year Ends Softer as 2024 Outlook Improves

After two strong revenue rebound years in 2021 and 2022, the air leaked out of the tires throughout 2023, with Baird-MDM survey respondents reporting decelerating revenue performance throughout the fourth quarter. Driving factors included extended customer holiday shutdowns, destocking, softening industrial market conditions and growing pricing pressures with inflation pressures easing. (Read more in the latest MDM 4Q 2023 MarketPulse Report)

The good news? Survey respondents indicate we may be in the trough. First-quarter 2024 revenue expectations are for 1.4% growth, with a full-year forecast of 3.3% growth over 2023. That estimate is in the ballpark of consensus forecasts from several sources. ITR Economics offers a more tempered outlook, as Alan Beaulieu painted a slight recessionary outlook for the year at the NAW Executive Summit on Feb. 1, with a moderate rebound beginning at the end of 2024.

MDM Forecasts for the entire U.S. wholesale distribution industry, which is on track to finish down about 1% from 2022 revenues of $8.2 trillion, currently estimates industry revenues to rebound in 2024 with 3.5% growth.

Excluding acquisitions, fourth-quarter revenues softened -0.8% year over year, while pricing moderated by -0.1% during the quarter. That’s a mirror image of the second quarter decrease of -0.8% after strong first-quarter revenue growth of 3.2%. Third-quarter 2023 revenues declined 0.5% year-to-year. 

Across the 20 sectors represented in the survey, the Gases & Cylinder Rental segment reported the strongest growth at 7.5% for the 2023 fourth quarter. The Landscape Supplies, Pool & Spa, and Waterworks Products segments posted the next strongest revenue performance. General Industrial (MRO), OEM Fasteners, Datacomm and Safety segments posted the most negative results.

Measuring sentiment for revenue growth in 2024, about two-thirds of respondents across sectors expect stable or increasing revenue growth, while a third expect revenue declines. A common thread to comments centered on second-half growth picking up. “We think there’s some growth possibility for 2024,” said an industrial MRO, safety and cutting tools distributor. “It would be 2H weighted for sure, with 1H probably pretty static or down y/y if the trend of 4Q23 carries into 1Q24. The latter part of the year indicators seem to be things will be picking up: infrastructure money is continuing to come through and some of these projects are not even out of the ground yet.”

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