The NAW Distribution Research & Education Foundation has just released a new book, “The NAW Economic Forecast 2004,” authored by distribution expert Adam Fein, Ph.D. of Pembroke Consulting, along with Mark Zandi, Ph.D. and Frank Markey of Economy.com. The 164-page book provides unbiased forecasts for virtually every major sector in the U.S. economy, along with corresponding forecasts for segments of the wholesale distribution industry in 2004.

The book can be used as crucial and objective input to your planning for next year. It comes in two parts: The first part deals with the wholesale distribution industry, including:

-- Overall revenue growth in 2004 for wholesale distributors

-- Overall employment growth in 2004 for wholesale distributors

-- Revenue and employment growth in 2004 in nine major geographic regions of the U.S.

-- Reference to NAW member associations, including ASA, is also included to help identify segments most relevant to your business

The second part deals with the customer industries that wholesale distributors serve. Each chapter in this section covers a different type of customer, analyzing and providing forecast data for issues such as:

-- Positive and negative forces affecting your customers' industries & businesses

-- Revenue and employment forecasts for your customers

-- Capital spending forecasts for your customers

-- Industry-specific forecast information for your customers

-- “Hot” and “Not” sectors of the customer industry

Fein and his fellow authors relied on some key macroeconomic forecast information as the basis for their new book. Highlights of the 2004 forecast include:

GDP. Overall U.S. GDP is forecast to grow 3.8% in 2004, compared to just 2.2% growth in 2003.

Inflation and Interest Rates. While overall inflation is forecast to remain low at 1.8% in 2004, the Federal Funds rate is expected to begin to creep up, increasing borrowing costs for consumers and businesses alike. The Federal Funds rate is forecast to end 2004 at 2%, compared with the 1.1% rate expected at the end of 2003.

Consumer Spending. A more stable job market will spur increased consumer spending. Retail sales and foodservice sales are forecast to increase 4.8% in 2004. Vehicle sales are also set to rise 1.9%, to 16.4 million units.

Tax Cuts. President Bush's tax cuts for individual taxpayers are helping boost spending by consumers, putting cash back into the economy for goods and services.

Employment. Businesses across the board are expected to begin adding employees, increasing total employment across the U.S. by 1.2%. The U.S. unemployment rate will fall in 2004.

Manufacturing. The battered U.S. manufacturing industry will slowly begin to recover through 2004. Industrial production will grow at least a healthy 3.3% in 2004. Manufacturers will also improve their capacity utilization rates to 76.3% in 2004, compared with 72.7% in 2003.

Energy Prices. Energy prices are forecast to decline in 2004, decreasing the costs of doing business for companies in energy-intensive industries such as manufacturing and distribution.

Depreciating Dollar. Export-oriented and import-competitive businesses will benefit from a weaker U.S. dollar in 2004. Exports of merchandise are forecast to rise 9.2% in 2004 as the dollar continues to depreciate against other currencies.

Government Spending. Businesses with U.S. government contracts will benefit from increased defense and Homeland Security-related spending.

Business Investment. Overall, businesses are expected to begin investing in both structures and equipment again in 2004.

Housing Market. One weak spot in the U.S. economy will be the housing market. After booming for several years, new housing starts are forecast to decline 8.8% in 2004 as mortgage rates rise. Investment in residential properties is forecast to decline 4.2% in 2004.

To learn more about the book or to place an order, visit www.nawd.org. ASA members qualify for discounts.

Sidebar: Plumbing & HVAC Lags Other Segments

In NAW's “Forecast 2004” a comparison chart highlights the anticipated revenue and employment growth among 18 different industries. Of these, the Plumbing and HVAC Distributors, at 4.7% and 0.9%, respectively, rank at the bottom in terms of expected growth in 2004. Other lagging industries are identified as Building Materials Distributors (at 4.9% and 1.4%, respectively) and Motor Vehicle Aftermarket Parts & Supplies Distributors (at 4.9% and 1.2%, respectively).

Industries at the upper side of the 2004 forecast include Apparel Distributors at 6.4% and 2.5%, respectively; Electrical Distributors at 6.2% and 1.6%, respectively, and Chemicals and Plastics Distributors at 6.1% and 1.6%, respectively.

Within the Plumbing & HVAC industries, the growth is forecast to be highest in the East South Central Region of the U.S., and slowest in the Pacific states.

According to the report, distributors who sell primarily into the residential market will likely suffer from declining new-home starts and a drop in remodeling spending. On the other hand, the outlook for commercial and industrial construction is positive.