What are Distributors’ Economic Expectations for 2024?

As 2023 begins to wind down, some distributors have reported slowing or flattening sales growth compared to quarters from prior years. Are distributors anticipating a recession, or will companies continue to expect consistent but modest growth in the next year?

In the latest Baird-MDM Industrial Distribution Survey, respondents were asked, “Based on conversations with customers/suppliers, backlogs, bidding/quoting activity etc., what is your current base case for the U.S. economy in 2024?”

Of the approximately 400 respondents — primarily consisting of distributors — 39% replied “flat/no growth,” while 38% said “slowing but still positive growth”; 20% said they’re “expecting a recession,” while just 3% said they’re “expecting an acceleration in economic growth.”

As we can see, more than three-fourths of respondents said they expect flat or slowing growth in 2024. For now, the trends seem to line up that way. According to the latest Baird-MDM survey, 3Q revenue came in at 140 basis points below respondents’ expectations.

One respondent called 3Q revenue “basically flat,” as distributors and suppliers ease into a “normal environment with the supply chain having worked itself out.” And while quarterly sales growth might be slowing compared with the two or three most recent years, some companies are still performing above their historical numbers, they said.

Among those expecting a slowdown, there doesn’t seem to be much noise about it lasting long enough to do any long-term damage.

“We’re expecting ~4-5% revenue growth next year, which would mostly be pricing driven,” another respondent said. “I’m expecting like +3-4% of price and very little volume growth. My gut feel says that it could be a weaker 1H with things taking off in the 2H.”

For all industrial segments, the survey forecasts 0.9% revenue growth in 4Q, a modest increase over the 0.5% decrease in growth during 3Q.

Read more about 3Q 2023 data by downloading and reading the 3Q 2023 MarketPulse Report.