Electrical distributor sales slipped in Q3 2024, but still remained positive, according to the latest Electrical Wholesaling/Vertical Research Partners industry survey. Respondents from the electrical market on average saw sales increase about +1% in 3Q 2024, with roughly equal contributions from price and volume. This marked a slowdown from the +3% growth seen in the first half of 2024 and was the first quarter of growth below +2% since Q4 2020.
The result was also short of the +4% growth distributors were anticipating back in July in the Q2 2024 survey. By category, Power (transmission & distribution) distributors led again with +1.7% growth, narrowly edging out Electrical Equipment sales, which were up +1.5%. Automation sales flipped modestly negative after inflecting positive last quarter, with a similar volume decline of -1.5% offset by lower price realization this quarter.
“The slower growth rate in aggregate belies the consistent tone from most distributors who described a “business as usual” environment, with nothing obviously new or noteworthy,” said VRP VP and Equity Analyst Nick Lipinski. “As we have heard throughout 2024, there were numerous mentions of interest rate and political uncertainty across the customer base, which we view as likely only short-term restraints on growth.
“The port strike pushout was a boon, and will be a key item on the watch list in the new year. Underlying bidding/quoting activity sounds healthy and the outlook for 2025 seems broadly positive. Data center and utility verticals remain the key growth engines. The recent Fed rate cut has already been broadly positive for commercial construction, but less impactful on residential housing demand/affordability at a time when inflation is pinching consumer budgets.”
Several respondents said the September rate cut by the Federal Reserve Bank would have a positive impact on their business.
“We hope the September rate cut along with future cuts will lead to more demand,” said one respondent. “Cutting the rate will help, but still lots of uncertainty going forward,” said another.”
Other electrical distributors commented on strong bid activity and backlogs and steady pricing. Two distributors made note of surging data center business and one said, “2025-2026 will be the biggest year ever for data centers.”
VRP’s Lipinski expects growth to be positive in 2025. “Looking forward, distributors are expecting sales up +2.8% on average for Q4 2024. In recent quarters, distributors had reverted to their relatively accurate history of forecasting, but the Q3 2024 result came in short of their ongoing estimates by the greatest magnitude since COVID.
“We are not overly concerned with this outcome as numerous mentions of interest rate and political uncertainty across the customer base are likely short-term restraints on growth in our view.
“Underlying bidding/quoting activity sounds healthy and the outlook for 2025 seems broadly positive. Several distributors also highlighted easing comps ahead as growth rates have moderated over the past year following an extended period of above-average growth in the post-pandemic recovery phase.”
