• Inflation has hit the industry hard, particularly for metal-based products. The recent heightened trade tariffs left the industry dealing with higher costs of raw material and threat of undercutting business spending. Distributors continued to pass along higher prices to customers. However, it may not always be possible or adequate to cover rising product inflation in an intensely competitive environment, consequently limiting margins. However, with United States and China coming to a truce over the trade wars, this will provide a relief to the industry.
   
• The industry’s customers are a varied lot comprising commercial, government, healthcare and manufacturing. Improved outlook and increased spending for these customers bode well for the industrial services industry given that MRO inventory accounts for as much as 40% of their annual budget. Further, the evolution of e-commerce has significantly impacted MRO demand with every passing year. In the United States, business investment and exports are two major indicators of MRO spending. Business investment is likely to grow supported by favorable financial conditions, expanding global markets, lower capital costs and an improving regulatory climate. 
   
• Improvement in end markets like recovery in manufacturing activity, residential and non-residential construction; ongoing revival in the oil and gas industry; and economic growth will continue to drive the industry. The recent tax reform is likely to lead to higher capital spending and attract incremental foreign capital to the United States, in turn bolstering exports.
   

Zacks Industry Rank Indicates Dismal Prospects