The economic forecast for 2006 indicates strong investment and capital spending; new plant equipment; strong consumption spending and growth in exports, according to Dr. Stephen Happel, professor of economics, W.P. Carey School of Business at Arizona State University. Dr. Happel was one of the featured speakers at the 2006 Executive Summit in Washington, D.C., hosted in late January by the National Association of Wholesaler-Distributors.

He said the 2006 real gross domestic product forecast remains at 3.4% and the real GDP consensus forecast for 2007 starts at 3.1%.

Capital spending is creating new jobs, Happel said. He predicted strong job growth of close to 4% assuming there is no major terrorist attack or natural disaster.

The greatest job growth has been in the Western states, while industrial states have been at the bottom. Ten of the top 13 states ranked by nonagricultural job growth are in the western United States. Michigan, Mississippi and Louisiana occupy the last three places on the list.

The tax cuts of 2003 contributed to an economic boom.

“If President Bush could reduce some taxes and make other tax cuts permanent, the U.S. economy would rock,” Happel said.

E-commerce will expand and there will be more outsourcing, he said.

Health care will continue to face problems as long as co-pays and HMOs exist, he stated, adding that private medical accounts are a step in the right direction.

Inflation remains the biggest problem, he said. Happel predicted 2.9% inflation for the coming year, “not a pretty number.” On the other hand, he forecasted 4.9% unemployment, a “good” number.

Housing starts will fall off, he said. In December the number of unsold new houses hit a record high. “The bubble is bursting,” he said.

Baby boomers in the 42 to 60 year age bracket are in their key spending years, Happel said. As interest rates go up, the net effect will be to create more income for U.S. households. “As long as it doesn't skyrocket, rising inflation is not bad for consumption spending,” he noted.

Wholesale Distributors Are Attractive Investment To Financial Community

In 1999-2000 there were fewer than three dozen financial buyers with a strong stated interest in wholesale distribution; now that number exceeds 80, representing billions of capital willing to be invested in this sector, according to James Miller, a principal with Brown Gibbons Lang & Co. Miller, another of the featured speakers at the NAW Executive Summit in Washington, D.C., addressed the topic, “Financial Investment in Wholesale Distribution: A Green Light in 2006.”

“In 2000, three transactions were done involving a financial buyer and a wholesale distributor; in 2005, there were 35 (transactions),” Miller said. “Interest in this sector is growing. I don't see it slowing down any time soon.”

A good wholesale distribution investment is almost like a portfolio investment in and of itself, he noted.

Financial buyers look for certain characteristics in a wholesale distribution investment candidate: capable management, stable cash flow, growth opportunities and IT systems, Miller said.

Profitability levels, employee training efforts, value-added services and a defensible market position are other factors financial buyers evaluate when considering an investment in a wholesale distributor, he said. Training is important because wholesalers are in a service business and much of their ability to service resides in their people, he explained.

“There is a lot of money out there,” Miller noted. “A greater percentage of those sources recognize the value of quality wholesale companies.”

- Pat Lenius

Executives from Wolseley plc (Reading, England) and its North American subsidiary, Ferguson (Newport News, VA) were among the attendees at the National Association of Wholesaler-Distributors' (NAW) Executive Summit Jan. 31-Feb. 2 in Washington, D.C. Pictured, left to right: Chip Hornsby, who will succeed Charlie Banks as chief executive officer of Wolseley plc effective Aug. 1; Frank Roach, who recently took over Hornsby's former duties as chief executive, Wolseley North America; Larry Stoddard, recently named senior vice president of business development for Wolseley Group; and Al Byrd, senior vice president of supply chain at Ferguson.