Home | Business News | Browse by Publication | M | Metal Center News

Service centers give year ahead a big thumbs-down: at just 3.5, this year's MCN Optimism Index shows a dramatic decline from years past.

Article Excerpt
[ILLUSTRATION OMITTED]

LOOKING AHEAD to the coming year and the likelihood of a lingering recession, service center executives are decidedly less optimistic about their prospects than at any other time since Metal Center News began tracking industry sentiment in 2000.

Data from the latest MCN survey show that the majority of service centers across the country expect sales and profits to weaken in 2009. Only about two out of 10 forecast growth. Also reflecting this bearish outlook are figures for employment, which indicate that service center industry staffing levels are down 15 percent or more compared to last year.

Each fall, MCN polls its readers to gauge their expectations for the coming year. To quantify industry sentiment, MCN asks respondents to rank their feelings on a scale from 1 to 6. Those indicating 1, 2 or 3 fall on the pessimistic half of the scale; 4, 5 and 6 on the optimistic half. This year's Optimism Index of 3.5--a weighted average of all the survey responses--shows a sharp drop from last year's 4.3. For an index that typically only shifts in increments of 0.2 from year to year, this 0.8-point drop is significant. In purely mathematical terms, it suggests a four-fold erosion of service center sentiment.

Obviously, attempting to quantify human emotions in simple mathematical terms is an inherently imprecise exercise, but changes in "optimism" levels among service center decision-makers tend to correlate to their forecasts for growth, purchasing, compensation and capital spending, among other factors. In other words--and not surprisingly--the more pessimistic they feel, the more bearish their forecasts.

Human beings (especially the breed that thrives in metals distribution) have a bias toward optimism. Reflecting this naturally positive attitude, 80 to 90 percent of all respondents typically place themselves somewhere on the optimistic half of the scale. That is until this year. For the first time, under MCN's methodology, the pessimists nearly equaled the optimists.

Service center profile

Companies responding to this year's survey ranged from less than $1 million in annual revenues to more than $7 billion. The average service center reported estimated 2008 sales of approximately $147.8 million, down 12 percent from 2007.

Small service centers, those with less than 20 employees, averaged $6.7 million in sales in 2008, down 18 percent from 2007. Midsize service centers, with 20 to 99 employees, averaged $35.9 million in 2008 sales, up more than 3 percent from the previous year. Large...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!