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Distribution finishing out the year with growth

Forecasts from Context show the channel ending 2022 with growth, but there are warnings of a bumpier ride in the year ahead

IT distribution across Europe is expected to finish the year with decent growth, but there are signs that negative economic conditions will have an impact going into 2023.

The industry is facing economic headwinds, including high inflation, exchange rate fluctuations and the cost of living crisis. But various pieces of recent research have indicated that the channel is feeling optimistic about its position.

Adding to that pile of positivity are predictions from Context, which tracks the fortunes of disties across Europe, with the analyst firm indicating that in that tier of the channel, there should be 3.7% year-on-year growth in 2022.

The numbers are better than had been expected when Context looked at prospects for this year back at the start of 2021, when it predicted 3.2% growth. The analyst firm is expecting a strong finish to the year, but has then talked of market conditions “softening” as we move into 2023.

The reason why 2022 will go down as a solid year is because of ongoing demand from customers for infrastructure, software and services that has benefited servers, networking and storage segments.

Some of the supply chain issues that have hampered the channel for the past couple of years have finally started to ease, and that helped those selling networking and servers.

In terms of specific product areas, starting with PCs, the expectation is that there will be plenty of caution, both among business customers and consumers, in the face of inflation. The absence of schemes such as government-backed education projects will also make life harder.

That same combination of caution and concern about the economic situation will also hit the display market.

Enterprise infrastructure is performing strongly and Context expects datacentres to see the biggest distribution growth of any sector over the next few months. Security, software and services are all looking good as areas where distribution will perform well.

Storage and server sales, helped by a reduction in backlogs, will also motor during the rest of the fourth quarter and networking sales are also tipped to end the year well, particularly in the enterprise switching category.

“Hybrid working trends will continue to fuel demand for hardware, while growth will also come from IT infrastructure, and government investment in health and education, supported by the NextGenerationEU Covid relief fund,” said Adam Simon, global managing director at Context.

“On the flipside, consumer demand has softened thanks to the surging cost of living, economic uncertainty and the spectre of recession – and will continue to do so into 2023.”

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