by Calculated Risk on 10/21/2008 01:45:00 PM

MSC Industrial Supply (MSC) supplies industrial products to industrial customers. They had some interesting comments today on their conference call about the economy (hat tip Brian):

MSC: “In the last several weeks, customers' sentiment has turned dramatically downwards. Here are a few of the things we have recently heard and I'll quote a few of them. One quote is our new orders are down substantially in the last few weeks. Another is that corporate has told us to reduce inventory. What we have also heard is make due with what you have. And finally, another quote is capital expenditures are on hold. Customers are concerned about the economy and the lack of available credit. They're reducing inventories, orders, and order size and there has been a trend toward deferring capital expenditures. There is a lack of visibility and until that improves, customers will continue to act in this manner. This has affected the smaller manufacturers and machine shops that still make up a significant portion of MSC sales to a greater extent than our larger customers.”

Analyst: In terms of the environment we're dealing with here today, I am interested in all of your opinions, your viewpoint in terms of how does this current environment look to you relative to past downturns with we have seen.

MSC: David, we view this time as unprecedented in history. The economy is undergoing a huge change, how that is going to shake out all remains to be seen, but I think what is important to know is it's a huge change that, frankly, no one had a chance to see coming, so we than specifically in our customer base there is a tremendous amount of fear that is gripping customers and evidenced by what we have seen the last couple of weeks in October, almost buying paralysis, that is really the way that we think about it, and frankly, in speaking with so many customers what we see happening.... if you go back to 9/11, pre-9/11, the economy was coming down in fact on a sequential basis over a period of many, many months, it slowed down and then there was the obvious tragic event of 9/11. What is has happened here with the credit crisis is while the economy was by no means booming, it was kind of rolling along and we almost think that what typically would have taken six, seven, eight, 9, 12 months to start to come down happened almost literally overnight. If you think about the ISM being in a flat 49-ish, 50 range for many, many months throughout the year to have it swoon as it did in September at 43, which, by the way, as I am sure you know is at 9/11 levels. From all the time that the ISM has been tracked, I don't believe it's been a point where the ISM measurement ever dropped off the cliff as fast. Even pre-9/11, the ISM was drifting downward to ultimately hit that level but it was not at kind of the steady state where it was, which is, you know, with the slower economy but, frankly, with the latest measurements showing was that things fell off a cliff.

One more thing to also note that our customer base is much more diversified [from the 9/11 period]. Very different from back then. We were just getting started with our large customer segment, for example, when where today the large customer segment is a much larger and vibrant part of our growth equation and that will, as it's already shown, will help to diversify us from that small to midsize manufacturing customer where the pressure on them is just enormous.
emphasis added

More real economy cliff diving.