Industrial Supply Distributors NAICS 423840

Jun 8, 2025 - Plunge in Capital Goods Orders

• New orders for key US-made capital goods – an indicator of future demand for industrial supplies – plunged in April amid mounting economic uncertainty around tariffs, Reuters reports, suggesting business spending on equipment weakened at the start of the second quarter. Non-defense capital goods orders excluding aircraft – a closely watched proxy for business spending plans – declined 1.3% in April, the largest drop since last October, according to Commerce Department data. Economists told Reuters that President Trump's on-again-off-again approach to tariffs was making it difficult for businesses to plan ahead. Moreover, in June Trump doubled tariffs on steel and aluminum imports to 50%, further fueling the trade war and economic uncertainty. A recent article in Industrial Distribution recommends that given current economic and supply chain uncertainty, distributors adopt an agile approach to their business by frequently reassessing their customer pipeline, pricing strategy, customer satisfaction, and channel priorities.
• The Trump administration’s on-again, off-again tariff strategy is sending ripples through the industrial sector, significantly impacting production costs, supply chains, and overall competitiveness in the machinery and industrial equipment sector, Manufacturing.Net reports. The implementation of an additional 10% tariff on Chinese imports, suspension of de minimis exemptions for Chinese shipments, and newly announced (and since delayed) 25% tariffs on goods from Mexico and Canada, are causing confusion and requiring manufacturers to quickly adapt to mitigate potential cost spikes and avoid supply disruptions. Manufacturers looking to reshore operations to avoid tariffs and shorten their supply chains are an opportunity for domestic industrial supply distributors. However, rising recessionary fears could cause existing and potential customers to delay or cancel new orders. In March, Goldman Sachs raised the probability of a US recession to 35% from 20%, amid tariff turmoil and economic uncertainty.

• The US manufacturing sector – a driver of demand for industrial supplies – began 2025 on a long-awaited positive note, with economic activity in the sector expanding in January following 26 consecutive months of contraction, according to the latest Manufacturing ISM Report On Business, which surveys US supply executives. “Demand clearly improved, while output expanded and inputs remained accommodative,” the Institute for Supply Management's (ISM) Timothy R. Fiore, chair’s ISM’s Business Survey Committee, said. The Manufacturing PMI registered 50.9% (above 50 indicates expansion) in January, 1.7% higher compared to the seasonally adjusted 49.2% recorded in December. Per ISM’s January report, demand and production improved, and employment expanded. The eight manufacturing industries reporting growth in January (in order) were: Textile Mills; Primary Metals; Petroleum & Coal Products; Chemical Products; Machinery; Transportation Equipment; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Eight industries reported contraction including Nonmetallic Mineral Products and Wood Products.
• Employment by distributors of industrial supplies fell 2.1% in March compared to a year ago, while average industry wages rose 3.5% over the same period to $29.77 per hour, its first time below $30 per hour since last October, according to the latest US Bureau of Labor Statistics data. Industry sales are down this year while producer prices for machinery, equipment, parts and supplies wholesalers are rising sharply, up 46% from April 2020 through April 2025, according to the Census Bureau. Sales for the US industrial supply distributors industry are forecast to grow at a 2.52% compounded annual rate from 2025 to 2029, slower than the growth of the overall economy, according to the Interindustry Economic Fund.