The following is a pretty accurate assessment of what is going in the US economy – we think.

“—MSC Industrial Direct Q3 Earnings Call — July 6, 2016—

I’ll get started with current market conditions and our fiscal third quarter performance against the backdrop of what continues to be a very challenging environment. Conditions remain quite difficult, and in fact, grew even more challenging, as we progressed through our fiscal third quarter and into June. On our last call, we described a tough environment. And in talking to our customers and look at is the macro indices, commented that we saw the potential for some stabilization on the horizon. Unfortunately, that did not materialize, and in fact, things weakened. After a meaningful improvement in the March MBI reading to 49.7, April and May readings dropped significantly to about the 45 level. On a rolling 12-month average, the MBI currently sits to 45.3, which implies the continued and significant contraction in metal working manufacturing activity levels. This is consistent with what we’re hearing right now from customers who are describing short backlogs, soft incoming orders and low visibility.

It’s also consistent with what we’re hearing from suppliers who are seeing very much the same things. The root causes for this long down term remain the same. The ongoing effects of low oil prices and the strong U.S. dollars. The uncertainty around the impact of Brexit could serve to create further headwinds on U.S. manufacturing exports, given a stronger dollar, as well as the potential slowing of underlying European demand.

Overall, the sense that the industrial economy may have been stabilizing has given way to more belt tightening and less optimism among our customers. We are hearing more talk about furloughs, time off, and even some layoffs. And while our visibility remains very limited, we’re beginning to hear about distributors laying off sales people, which we have not much heard of until very recently. That said, we caution that our visibility is very low. At this point, it’s hard for us to say how much of this is a material step down in conditions as opposed to customers taking advantage of seasonal summer slowdowns with more extensive shutdowns.

These things continue to deteriorate. It would provide an opportunity for MSC to accelerate share gains as local distributors would come under even greater pressure. This would present opportunities including the hiring of industry sales people and capturing new customer and supplier relationships.”