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Business improving, but cash flow is still tight: economist

Keywords: Tags  Clare Zemple, American Wire Producers Association, Zemple Strategic, Interwire, Jon Cornelius, Sumiden Wire Products

ATLANTA — The U.S. economy is improving and there’s no danger of an economic backslide in the coming years, but cash flow and buying confidence have not yet returned to pre-recession levels, economist Clare Zempel told members of the American Wire Producers Association.

"The economic outlook: the direction is up," Zempel said at a breakfast reception at the Interwire convention in Atlanta. "Any slowdowns that do occur, for whatever reason, are going to be temporary. The bet should be on growth."

Anecdotally, however, company owners were not as bullish as indicators might suggest. "Business is better, but it’s not where it should be," said Zempel, principal of Zempel Strategic, Fox Point, Wis.

Steel wire industry sources at the convention agreed.

"End users are feeling good about what they’re seeing out there," said a sales manager at a wire drawing company in the Midwest that sells into a range of markets. "It hasn’t taken off yet, though."

Various economic indicators show positive signs, Zempel said, including falling unemployment claims, steady oil prices, improving housing markets and relatively steady commodity prices, but the difficulty in obtaining loans is holding back markets like the steel wire rod industry.

"The government restrictions on bank loans are preventing banks from making credit available easily," Zempel told AMM on the sidelines of the event. "Credit is harder to get than would seem to make sense."

The steel wire rod industry is feeling both the improvements and credit tightness in their order books.

"There’s a lot of money hung up. The orders are there," the Midwest manager said. "But people are waiting for money to come before they start projects."

While demand has improved, buyers of wire products are not yet willing to make big bets on products and cash flow remains icy, sources said.

"I don’t think anyone wants to take a big position right now because they’re nervous about price volatility. Margins remain pretty tight so stakes on buying decisions can be high as well," Jon Cornelius, executive vice president of Stockton, Calif.-headquartered Sumiden Wire Products Corp., told AMM.

Cornelius added, however, that he was seeing improvements in downstream markets and that business was better in the construction sector. "It feels like the worst is behind us," he said.

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