Material Handling Equipment Makers Upbeat About 2012

Consumers and Investors are regaining confidence in economic conditions. Despite slow GDP growth in the next few quarters, the Material Handling Industry of America (MHIA) expects improvements in unemployment, industrial production activity and factory operating rates (utilization) will have a positive impact on material handling equipment manufacturing (MHEM).

According to MHIA’s latest MHEM forecast, developed by Hal Vandiver, MHIA's executive consultant, new orders for material handling equipment, which grew an estimated 15.2% in 2011, will continue to grow 8.0% in 2012 and 12.0% in 2013—with continued growth in 2014.

MHEM Shipments grew an estimated 17.1% in 2011. The outlook is 9.0% in 2012 and 11.0% in 2013—again, with continued growth in 2014.
MHEM Domestic Demand grew an estimated 18.4% in 2011. Demand (shipments plus imports less exports) will likely mirror shipment growth in 2012, 2013 and 2014.

Putting those expectations together, MHIA has the following expectations for 2012:

1. The United States Will Probably Avoid a Recession.

With consumers seemingly willing to spend and businesses more disposed to hire, over the next year U.S. growth will average between 1.5% and 2.0%. In the near term, the Eurozone sovereign debt crisis is the biggest threat. The longer-term outlook is clouded by uncertainty over how America’s burgeoning sovereign-debt problem will be fixed.

2. The Eurozone Is Headed for a Second Dip.

The Eurozone economies will see negative growth next year, with the region as a whole contracting by about 0.7% at best.

3. Asia Will Continue to Outpace the Rest of the World.

Growth in the region will remain resilient and will continue to be the strongest in the world (around 5.5%).

4. Growth in Other Emerging Markets Will Hold Up, for the Most Part.

Barring a catastrophe in Western Europe or the U.S. or another plunge in commodity prices, growth in emerging Europe, Latin America and Africa should hold up fairly well.

5. Commodity Prices Will (Mostly) Move Sideways. During the coming year, the price of oil and other commodities should fluctuate around current levels.

6. Inflation Will Diminish Almost Everywhere.
Without a spike in oil or food prices—triggered by a geopolitical events or bad weather—the inflation picture in 2012 will be quite benign.

7. Monetary Policy Will Either Be on Hold or Ease Further.

Easing inflationary pressures and increasing anxiety about the growth outlook have changed the priorities of central banks worldwide.

8. Fiscal Policy Is Set to Become Even Tighter in the United States and Europe.

U.S. Federal government purchases will contract (after adjusting for inflation) over the next several years, acting as a major drag on growth. State and local spending is also expected to fall for at least another year.

9. With the Exception of the Euro, the Dollar Will Keep Sliding.

The dollar should keep sliding against most currencies, especially those of emerging markets. However, the dollar will likely appreciate against the euro in the near term—as long as the Eurozone crisis drags on.

10. Most of the Risks to the Outlook Are on the Downside.

Two risks look particularly threatening: The first is the possibility of a financial meltdown in the Eurozone, pushing the global economy into recession. The second is a sharp slowdown in China’s growth (say to 5%) triggered by a bursting of its real estate bubble. Such a scenario would have the biggest impact on the rest of Asia and commodity-exporting emerging markets.

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