We\’re in an environment that could be called BC vs PC – Before Coronavirus and Post Coronavirus. The challenge is that PC, which could be defined as Q3 and Q4 don\’t look pretty.
Everyone, at least manufacturers, are asking \”what is the forecast?\” The challenge is that all want an answer for the short-term. \”What will be \’this month\’? Next month? Q2?\”
The challenge with being able to answer is that the environment is changing too quickly. States \”shelter-in-place. States close construction sites. Industrial facilities close and need to stop due to someone catching the virus. Government(s) expand social distancing and \”stay at home\” policies\”. Government resources (especially permitting offices / inspectors shorten their hours) and more. Need we go on?
And economic data is, by definition, retrospective. It can only report on what is happening. The crystal ball that has been refined by years of data is now cloudy. The future is unknown.
Given this environment our friends at DISC Corp have put together a forecast for the remainder of 2020 and looking out to 2023. Hold on to your seats.
First, you\’ll be disappointed in the Q2 forecast. It isn\’t pretty and it is forecast based upon data that enters their model as of March 20th. So, by definition it is wrong (and for DISC\’s customers they have projected the quarter in their Monthly DISC Report – special ElectricalTrends discount at bottom of the article). We have some suspicions of the decline, albeit it may be regional / geo-specific in nature. But it won\’t be pretty, especially for April and May.
What the electrical industry\’s electrical forecaster says
We are in an extraordinary time. As an industry economic advisor, I can truly say this has been one of the most difficult times to provide reliable economic information and forecasts. The situation is changing by the day and the hour. Food and beverage, travel and entertainment are off by 90%. States are issuing stay at home orders and now we see an increase in states shutting down construction sites. We could not predict the onslaught of the coronavirus, we cannot predict with any degree of certainty the near-term outlook with any reasonable degree of certainty.
The main thing to remember is that an economic construct begins and ends with people.
Over the coming days, weeks and quarters, we will see continued growth in the numbers of infections and deaths. Containment efforts will escalate in order to protect not only people but our future. As a result of these containment efforts, we will need to continue to sacrifice short-term economic stability in favor of preservation of life and longer-term positive economic outcomes. Businesses will be lost. Many people have, and will be, out of work. Bills and mortgages will go unpaid as market and economic uncertainty limit any new investment in people, property, plants and equipment. Government stimulus, while supportive, will not cure all. Plan accordingly.
DISC Corp Baseline Forecasts for Electrical Distribution as of March 31st 2020
- In general, for most markets the current forecast is to return to pre-pandemic levels by 2023 (equivalent to 2019).
- The current, but changing, expectation for the overall Electrical Distribution market is to finish 2020 down -12.4% below 2019 results.
- Expect further downward revisions as we continue to gather data. As of now, the expectation for 2021 is flat to slightly downward at -0.3%. We are forecasting growth of 7.8% in 2022.
- For the Construction sector the forecast is down -16.4% year over year for 2020 with the bulk of the downturn falling in the 3rd and 4th quarters of 2020.
- Construction markets tend to fall behind other markets and could experience near-term smaller declines followed by steeper declines later this year and into the start of 2021. The forecast for 2021 is down -2.4%, and we are forecasting growth in 2022 of 8.6%.
- The Industrial sector current forecast is for year over year to be down -12.2%.
- The automotive industry is a heavy contributor to this forecast, as plants are closed or idled. The sector will return to modest 1.2% growth 2021, and 7.7% in 2022.
- The Institutional sector forecast is down -6.3% for 2020 with a return to growth of 1.4% in 2021 and 7% in 2022.
- The Utility sector forecast is down -5.8% in 2020, flat in 2021, and a 6.4% increase in 2022.
Current Quarterly Forecasts for 2020
The current coronavirus pandemic will continue to negatively and unpredictably pressure results through Q1 2021. Expect these forecasts to be revised downward in the weeks ahead. We currently anticipate a measured and slow market rebound beginning Q4 2020 with a return to positive results midyear 2021 and recovery to pre-pandemic (BC) market levels in 2023.
- Detailed information by sector, with quarterly forecasts and key economic indicators is available in the DISC Report. Call (346) 339-7528 or email Chris Sokoll to find out how to obtain your copy. Mention ElectricalTrends or Channel Marketing Group and save $100, a 12.5% discount.
These insights, combined with those generated from our recent Coronavirus Electrical Market Sentiment Report provide a market snapshot.
While disheartening, it is likely to turn out to be optimistic. Perhaps the trend helps with second half forecasting. The reality is that Q2 is still unknowable. We\’ve heard down 30-50% BC vs PC. Some geographic areas could be down much more … and these are major markets. Some rural / suburbia markets may be fine if there areas are not impacted significantly by the coronavirus. No one knows and, according to health prognosticators the next 2-3 weeks are critical.
Bottomline, adapt based upon what you know to survive and come out the other side. There is light at the end of the tunnel and, for many, it isn\’t the train coming at them. In the words of one manufacturer, \”at some point the glide path for sales will change\”.
Stay safe. Distribution will survive and there will be an electrical industry PC.