Prairie Industry Perspective – Electrical Distribution Industry September 2022

According to Electrical Wholesaling (“EW”), during 2022, participants in the electrical distributors industry faced an assortment of market conditions that impacted sales, which will likely continue into 2023. For instance, while the construction market performed well in 2022, distributors also had to deal with trickier issues such as rising costs and supply chain delays. Still, in its “2023 Market Planning Guide,” EW estimates that, in 2022, electrical distributors’ sales grew by approximately 9.7%.

Similarly, Christian Sokoll of DISC Corporation (“DISC”), a provider of sales forecasts and related market data for the electrical wholesaling market, estimates that 2022 sales by electrical distributors increased, totaling $136.6 billion, up 11.0% from 2021. Like EW, Sokoll alludes to the fact that not all of the year’s sales gains were due to demand. Indeed, he specifically states that a 16.0% year-over-year price increase “contributed significantly” to 2022’s returns.

To be sure, higher prices for electrical products did have an impact on distributors’ sales during 2022. The most recent EW/Vertical Research Partners (“VRP”) survey concludes that electrical distributor sales increased 6.7% on 3.5% volume growth and 3.2% price growth during the fourth quarter of 2022. According to Electrical Marketing, price inflation was responsible for about 50.0% of distributors’ revenue increases during this time period. Meanwhile, EW’s “2023 Market Planning Guide” reports that, while year-over-year price increases for electrical products decelerated as 2022 came to an end, they still remained near record highs. In fact, Electrical Marketing’s monthly “Electrical Price Index” for December 2022 was higher on both a month-to-month (+1.2%) and year-over-year (+10.4%) basis, reaching its highest year-over-year reading since August 2022 as well as its highest monthly increase since April 2022.

Nevertheless, the National Association of Electrical Distributors’ “Expected Sales Growth Index” for the fourth quarter of 2022 rebounded to 3.51, up from 3.40 in the third quarter of 2022. In other words, despite any concerns they may have had regarding the outlook for the industry in 2023, the typical responding distributor anticipated that sales would grow in the range of 4.0% to 10.0% during the next 12 months.

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