The fourth quarter Baird Industrial Distribution Survey indicates the industrial economy is in recession.

The fourth quarter Baird Industrial Distribution Survey indicates the industrial economy is in recession. On average, respondents’ fourth quarter revenues were down significantly, with increased pricing offsetting unit volume declines. Expectations are for continued declines through 2009, though the trajectory should not be as severe as it was in recent weeks, which were negatively impacted by abnormal holiday closures.

Survey Details

Baird’s Industrial Distribution Research Team, led by Senior Research Analyst David Manthey, CFA, collected feedback on fourth quarter results from nearly 300 independent and captive distributors with combined annual revenue in excess of $30 billion. Key survey findings include:

 Average revenues were down significantly in 4Q08 at -3.9% vs. essentially flat in 3Q08. Overall pricing remained positive, adding +1.1%, although down from +2.9% price last quarter.

 Six-month outlook is for continued declines in 1H09 with an expectation of -3.6%.

 Respondents are anticipating moderating declines in 2H09 with an overall 2009 revenue expectation of -2.3% implying -1.0% in 2H09.

 Abnormal holiday closures added to December/January weakness, with 57% of respondents indicating some level of closures over the recent holiday weeks.

 Areas of strength: Over the next six months, growth is only expected by distributors of Rental Equipment with the most severe declines expected by distributors of Datacomm products, Fasteners and Roofing/Building Materials. The most promising end markets include Wholesale Trade, General=2 0Contractors and Chemical.

 Respondents also indicated:

• Inventory decreased with revenue but is to some extent seasonal;
  
• 73% of respondents reported seeing affects of the credit crisis vs. 54% last quarter.

For more information on the survey, e-mail MantheySurvey@rwbaird.com or call David Manthey at (813) 274-7630.