Report: Economic Recovery Evident In Distributors' Q3 Sales

The improvement in North America is likely being driven by increased corporate profits due to cost-reduction strategies and more available credit, according to the report.

"In addition to improving profits and credit, a double-digit currency tailwind and pent-up demand could produce the first positive year-over-year comparison in a year in the December quarter," wrote Raymond James analysts in the report.

Third-quarter IT sales through distribution fell 11.6 percent compared with the third quarter last year, but they increased 6.5 percent compared with the June quarter. In the past five years, the second-quarter to third-quarter changes have ranged from -0.5 percent to 4.6 percent, so this year's bump is significant, wrote Brian Alexander, managing director of equity research at Raymond James & Associates.

Worldwide, Raymond James expects IT sales through distribution to fall 10.6 percent in the third quarter compared with the third quarter last year. Though it sounds dismal, it's actually the best performance in a year-over-year comparison since the third quarter last year, when sales increased 2.2 percent compared with 2007.

Improvement is evident in both the SMB and large-account sectors, according to Alexander. Sales for SMB-focused resellers, such as direct marketers, are expected to fall 15.5 percent vs. the same period last year, but the sequential comparison was again a healthy 5.6 percent increase compared with the second quarter.

Large corporate account shipments fell 15.7 percent in the third quarter compared with last year, while sales to public-sector accounts increased 1.3 percent for the same periods.

According to Raymond James, there is an "even money chance" of a flat to positive year-over-year comparison for fourth-quarter IT sales through distribution.

"In addition to improving corporate profits and less tight credit, we would point to possibly the beginning of a product cycle driven by pent-up corporate demand for infrastructure products. This tone runs somewhat counter to the cautious demand outlook provided by HP, but the magnitude is likely in the same ballpark," Alexander wrote in the report.

Scott Brown, Raymond James' chief economist, added that recent economic data suggests the recession has ended.

"Financial conditions have improved but remain far from normal. Fiscal stimulus is still building and will help to support the recovery into 2010. However, fiscal stimulus will likely begin to ramp down later next year. A common mistake made during the recoveries from severe recessions is for policymakers to take the punchbowl away too early, generating a risk of a double dip," Brown wrote in the report. "However, both fed Chairman Bernanke and Christina Romer, Chair of the President's Council of Economic Advisors, are experts on the Great Depression and realize the importance of maintaining policy stimulus."