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Polar Vortex…Chilling Fingers & Profit Margins

February 27th, 2014 by Mike Meyerhoff

For most Americans the past three months have been all about shoveling driveways and learning how to ice skate with their cars.  Those living in south Florida and California have had to break out the jeans and windbreakers…what a pity.   The silver lining here is that we’ve all had plenty of extra time to scrape those windshields and raise those wiper blades because the phones have stopped ringing. It seems as though this “polar vortex” is freezing more than just the air…it’s also chilling profit reports nationwide.

The ISM’s (Institute for Supply Management) PMI (Purchase Manager Index) sank to 51.3 in January…a decrease of 5.2 points from December’s 56.5.  Many of the ISM’s other indices (Production Index, Raw Materials Index, etcetera) were also off significantly which the ISM attributed to adverse weather conditions.  As a PMI in excess of 43.2 generally indicates overall economic expansion, a dip to 51.3 doesn’t mean recession so much as it reflects a drop off in growth.  The S&P is also down 3.5 percent from December which also suggests a slowdown in growth, but this is probably a good thing if you are of the mind that the market could use a slight correction…better than the correction we got in 2008.

The only numbers moving up see to be import tonnage (imported finished steel products up 27 percent from December) and the ISM price index (up 7 points from December to 60.5) which is more a function of inflation, but that’s another matter for another day.

So what does this all mean to us dealers duking it out in the trenches?  Well, if we KNEW that we’d all be sipping mai tais in the south Pacific on my yacht captianed by Meghan Fox and Carrot Top (say what you will…I love that guy!).  But seeing as though I have to split the canoe rental costs three ways for my annual float trip down southern Missouri’s Jack’s Fork river, all I can say is GET ON THOSE PHONES AND MAKE THOSE COLD CALLS.  Cheap foreign surpluses are flooding our domestic pipe market which is already as timid as I was at my seventh grade school dance.  Q1 and Q2 of 2014 will probably be a bit slower than last year’s with random projects hitting here and there.  Energy and construction projects are still trying to navigate through an election year congress so I’m crossing my fingers that we’ll see some resolve come Q4 this year.  That makes this a PERFECT time to get back in touch with old accounts and find new customers so you’re ready to rock this fall.