PTDA members approaching 2008 cautiously
Based on the results of the Power Transmission Distributors Association (PTDA) 2008 Member Forecast Survey, concerns that the United States might be sliding into an economic recession are not immediately evident among distributors and manufacturers.

Among the 46 distributor respondents, 63 percent anticipate sales growth in 2008, just over a quarter project flat sales and about 11 percent expect a drop.

The 57 manufacturer respondents tend to be a bit more optimistic—83.6 percent see sales gains and 16.4 percent predict flat sales. No manufacturer survey participants predict a decrease in sales.

But many economists and some PTDA members fear a potential “perfect storm” could slam the U.S. economy sometime in 2008 then fully impact industrial distribution and many manufacturing sectors in 2009 and 2010. Based on those predictions, many PTDA members are proceeding with caution in 2008.

The crystal ball is cloudy
The one thing that’s clear about 2008 economic conditions—both in general and for the PT/MC industry—is that nothing is really clear.

Not every economist is forecasting a recession for 2008 although a general slowdown is expected. Meanwhile, some PTDA members who are upbeat for the coming year are worried about 2009 and 2010.

“We’re doing much better than anticipated for 2007,” said Helen Yost, president of The Rowland Company, based in Philadelphia. “I think 2008 will flatten out a little, and then we’ll need to be more creative in 2009 and 2010.”

Alan Beaulieu of the Institute for Trend Research doesn’t see 2008 as a bad year for most PTDA members. But trouble could be around the corner.

“The U.S. economy is incomprehensible at $12 trillion,” Beaulieu said. “It’s like a battleship. It takes a lot of time and energy to turn it.”

“I would be in the optimist camp with a lot of PTDA members for 2008, but I would be careful for 2009. I would use the good times of 2008 to prepare for 2009 and 2010.”

Beaulieu counsels firms to do more than just batten down the hatches. With a new administration coming into the White House in January 2009—and a huge national deficit—tax cuts and credits may be rolled back. Some of these might impact small- and medium-sized businesses as well as large corporations and wealthy individuals.

Gross and profit margins
For the second straight year, half of the survey respondents expect gross margins to remain flat. An almost equal percentage of distributors versus manufacturer are in this camp. Meanwhile, 43.5 percent of distributors and 41.5 percent of manufacturers expect growth in gross margins, mostly at under five percent.

The expectations about profit margins closely mirror the gross margin data. Among distributors, 45.7 percent say profitability will remain flat and 50.0 percent anticipate profit gains. Among manufacturers, 41.5 percent expect profits to remain steady and 50.9 percent see increases.

Channel relationships evolving
Among all distributor respondents, 37 percent said they expect to add supplier lines, 47.8 percent said the number would remain constant and 15.2 percent expect to trim lines. Meanwhile, almost three-fifths of distributors said they expect end-user customer demand for local inventory to rise.

More than half of manufacturer respondents expected their distributor rosters to increase and almost the same number thought their sales through distribution would climb. Only 7.8 percent of manufacturers projected the number of their distributor partners or distribution sales would slip.

To access the full results of the PTDA 2008 Member Forecast Survey, visit www.ptda.org/ForecastSurvey.

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