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Optimism's on the comeback: outlook survey puts positive spin on '04: MCN's optimism index shows industry sentiment nearing pre-recession levels.

Article Excerpt
Service center executives are expecting a much-improved economy and metals market in 2004. Indeed, industry optimism is approaching 1999-2000 levels, those prior to the frustrating economic slump that has altered the metals landscape.

Making the results of the latest Metal Center News Outlook survey even more compelling is the fact that readers responded in late October and early November, before announcements of surprisingly high third-quarter GDP growth, accelerating manufacturing activity and improvement in the labor market. Repeated today, the survey might be even more bullish.

To quantify industry sentiment, MCN asked respondents to rank their feelings on a scale from 1 to 6. Those indicating 1, 2 or 3 fell on the pessimistic half of the scale; 4, 5 and 6 on the optimistic half. Averaging all the responses reveals an MCN Optimism Index of 4.6--up 7 percent from last year's 4.3, and 15 percent from 4.0 in 2002.

Overall, more than 89 percent of survey respondents characterized themselves as somewhat or very optimistic, up from 76 percent last year and approaching the 91 percent peak of year 2000. Sixteen percent ranked themselves at the very top of the 6-point scale vs. 12 percent last year and 7 percent the year before.

Why the focus on "optimism?" We do this because there's a correlation between executives' attitudes and the decisions they make regarding expansion or contraction, raising or lowering inventory levels, making capital investments, etc. Not surprisingly, their forecasts for demand, sales, profits and capital spending uniformly point toward continued recovery in 2004 (see Service Center Stats chart on page 16).

SALES AND PROFITABILITY

Companies responding to the survey range in size from less than $500,000 in annual sales to more than $2 billion, employing from a handful to more than 5,000 workers. The typical (median) service center is a $13 million enterprise with 32 employees, including seven salespeople who each generate about $1.75 million in annual sales.

The past few years have been tough for most service centers, with buyouts and bankruptcies all too common, and many are not out of the woods yet despite the improving economy. Of those surveyed last fall with about two months to go...

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