Second-Half Rebound in Doubt
Chicago Tube & Iron President and Chief Operating Officer Don McNeeley, like others in the metals distribution business, has been eagerly awaiting the promised rebound in the second half of the year. But the closer the second half gets, the less enthusiastic he’s become about its arrival.
McNeeley told Metal Center News, in an interview for the magazine’s upcoming August midyear service center report, that his company had planned for growth in the second half. CTI expected up to 60 percent of its business would arrive in the final two quarters. Since the metals industry was six months late entering the most recent recession, he reasons, it should have a similar exit from the downturn, pointing toward a second-half rebound.
“It’s the classic slow-growth exit from a recession,” says McNeeley, the 2006 MCN Executive of the Year, who doubles as an economics professor at Northwestern University.
While CTI is still expecting that forecast to play out, there are dark clouds on the horizon that threaten not just the accuracy of that projection, but the foundation. “We are still betting on that, although I hasten to point out that there is a growing possibility, not probability, of a double-dip recession,” he cautions.
McNeeley’s pessimism is the result of two major factors. The first is the failure of the stimulus money to make its way to infrastructure projects. The other is the troubling number of Americans still out of work. With unemployment stubbornly hovering near 10 percent, continued economic growth is far from assured, McNeeley says.
“We’ve got a $14 trillion GDP, and 70 percent of that is consumer spending. When one out of every 10 consumers is out of work, that has to have some significant implications for the recovery.”
Moreover, he says, the underemployment figures are even more distressing. Some estimates suggest the combination of individuals who have taken “temporary” lower-paying jobs plus discouraged individuals no longer seeking work puts the real unemployment figure near 17 percent.
“That’s close to 20 percent of consumers removed from consumption. They are not going to be out there buying durable goods,” he says.
And that is a sobering thought for service center executives who hoped the worst was behind them.