2019: The Year of Wholesale Progression or Recession?
The economy is headed for a tailspin. At least that’s the narrative being spun by economists near and far. The popular projection is that 2019 is poised to be a challenging year for HVACR distributors. So, what does that mean for your business? Are you doomed for failure regardless of how well your company performs in 2019?
MDM/BAIRD
According to a recent MDM/Baird Survey of 500 respondents with a total aggregated annual revenue exceeding $100 billion, 2019 will be a “year of moderate earnings growth.”
Across all 18 industrial sectors examined in the survey, HVACR reported the most promising future, boasting a predicted 7.6 percent growth in 2019. In the first quarter alone, HVAC distribution is expected to increase 5.2 percent.
In summary, the survey reports the industry can expect residential construction to slow due to higher mortgage rates and lower affordability in 2019. Nonresidential construction indicators remain strong but are flashing caution, and respondents expect the repair and remodel markets to hold up well this year.
ITR ECONOMICS
Alan Beaulieu, president, ITR Economics, paints a darker forecast. He insists distributors should not expect a repeat of 2018 in 2019.
“Consumers are going to be price-conscious in 2019,” he said. “Housing starts will continue to slow, and existing home sales are expected to plummet. That means there will be fewer remodeling opportunities, and consumers may be less likely to spend serious money with you in 2019 than they were in 2018.”
Beaulieu said 2019 is shaping up to be a good year for HVAC owners to work on their businesses rather than in their businesses.
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“I suggest you borrow as much as you can now to invest in your company,” he said. “If you want a new CRM, to upgrade your website, or to add more marketing, do it in 2019. Figure out what you need, and who you need, to be busier than you are today and spend the money to make it happen.”
CONCLUSIONS
These two economic reports cast two different shadows over 2019. Sort of like cable news, you’re welcome to fly the flag of whatever message best fits your beliefs.
Regardless of your viewpoint, it’s important to remember that wholesalers can’t control GDP or what economists see in their crystal balls. Macro-level predictions generally have very little impact on a distributor’s day-to day operations.
Wholesalers who continue to motivate the employees stocking their warehouses and selling their products at the counter and in the field will continue to find success. On the flipside, those who talk themselves into a recession will likely end up in a rut, regardless of any economic report.
Publication date: 2/12/2019
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