We expect still a little bit of headwind from these inventory reductions as we go through the first half of the year. I think of it – we’re working through our own inventory levels here and we expect to reduce our inventories in the first half. We think our customers and channel partners maybe doing some of the same, but it’ll be less of a headwind here in 2024. So you put all of that together, I think you’re an environment where things are pretty stable. Test and measurement you mentioned semi, it’s less than 3% of our revenues. There is an expectation of a modest market pickup here in the second half. We expect to gain share and launch new products in this space. So we’ll grow a little bit faster than market there. But overall, we’re not expecting a big recovery in demand or the economy to pick up in the second half.
This is basically based on kind of current run rates. The one outlier I’ll just reiterate is automotive, we’re going from a build environment in 2023, that was up in the high-single digits. We expect that to be about flat. And so the growth in automotive is all from penetration gains and continued market share and innovation in China which has been an incredible contributor to our overall growth rate and will remain so for the foreseeable future.
Andrew Kaplowitz: Very helpful color, Michael. And then Chris or Michael, you mentioned unique challenges in specialty equipment and construction products. Maybe you could elaborate on what you’re seeing in these segments. Doing more PLS in specialty, for example, what’s the outlook or frame the outlook for 2024?
Christopher O’Herlihy: Yes. That’s correct, Andy. In terms of specialty particularly, we’re doing some strategic portfolio work there heavier, I would say amount of product line pruning than we normally expect in a normal maintenance environment. We’re doing quite a bit more on specialty really to position that segment for long-term growth of 4% plus. So that’s what’s going on there, and we’re pretty pleased with the progress around that. On construction, it is very much a market story. I mean, obviously, all three main markets for us, North America, Western Europe, and Australia and New Zealand are all forecasting significantly declines in housing bills next year, that will be 11% in North America, mid-single digits in Europe and high-single digits in A and Z. So that’s really what’s impacting the construction business.
Andrew Kaplowitz: Helpful, guys. Thank you.
Christopher O’Herlihy: Thank you.
Operator: Your next question comes from the line of Joe O’Dea with Wells Fargo. Your line is open.
Joseph O’Dea: Hi. Good morning. Thanks for taking my question.
Christopher O’Herlihy: Good morning. Yes.
Joseph O’Dea: So I mean, you talked about the daily sales rate from Q3 to Q4. It sounds like overall customer tone is perhaps getting a little bit better. You’re talking about adding some headcount. Can you just expand a little bit on customer conversations over the last several months to understand a little bit better sort of the verticals where you see some of that uptick happening, and then where you are adding headcount within the business?
Michael Larsen: Yes. I mean, I think the tone from customers has been pretty cautious all year, particularly on the CapEx side of things as we talked about. If you go back to our Investor Day last year, we talked a lot about accelerating our efforts to drive high quality above market organic growth primarily fueled by, as Chris said earlier, our customer-back innovation efforts. And so those are the areas, all growth related headcount ads that we’re making to make sure that we have all the capability we need in terms of innovation, commercial, sales and marketing resources to drive continued progress and deliver on our above market organic growth commitments.
Joseph O’Dea: Got it. And then on the channel inventory side of things, can you just talk about the visibility that you have and any context on how maybe elevated those inventory levels got during supply chain constraints? Where you think they are now relative to normal? It sounds like you think first half of this year you could still see customers doing a little bit of work to trim inventories.
Michael Larsen: Yes. I think by and large, if you go back historically, we haven’t had great visibility to the levels of inventory in the channel and with our customers. I think we have much better visibility today, given that we’ve been talking about it all year. Overall, it’s been a drag of a percentage point on our growth rate for the year. It was 1.5% in Q3, 1% in Q4, and I think several of our segments, we are back to kind of normal inventory levels and this is largely behind us. And then there’s maybe a few other areas where there might be some continued, but certainly less headwind as we go into Q1 and Q2. And then I think at that point, we’ll give you an update. I think we’ll be able to say this is now completely behind us.
Joseph O’Dea: And so with respect to the growth outlook that there’s no real inventory – notable inventory headwind within that growth range?
Michael Larsen: Well, there’s a little bit. I mean, obviously if you look at our run rates, it is included in our run rates at a higher level than what we might reasonably expect. So if that plays out the way we expect, that would be certainly favorable to the run rate and to the guidance that we just gave you.
