The 2020 Mid-Year Economic Update_long

MSC Grows Sales Despite Weaker Demand

CEO: Long-term impact of low energy prices may be positive for U.S. manufacturing.
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In spite of a tougher demand environment created by the rapid drop in oil prices, softening export market and poor weather, MSC managed a sales increase of 6.8 percent in its fiscal second quarter. National accounts in government grew at a "double-digit pace," President and CEO Erik Gershwind said in a call to discuss the quarterly results.

But the company's core customers saw a more pronounced drop in growth rates in February than its other customers. Heavy manufacturing and durables saw some of the hardest hits.

"Our business has very little direct exposure to the oil and gas sector," Gershwind said. "There is little doubt, however, that the dislocation in this sector and the resulting uncertainty is currently impacting broader manufacturing activity."

But in the long term, Gershwind said, low energy prices could bode well for U.S. manufacturing. Lower energy prices mean "more dollars in consumers' pockets and that's more disposable income to spend," he says. But the challenge is waiting out the "dislocation" that's creating a lopsided market.

The broader weakness may be "more than a temporary disruption," as well, according to Gershwind. In conversations with customers, he has noticed a change in the manufacturing environment, but it's still uncertain what that will mean for the rest of the year.

"We're hearing more caution than we are excitement for the near term," he said.

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