Material Handling Equipment Manufacturers Forecast Raises Recession Risk

Unemployment, industrial production activity and factory operating rates (utilization) are improving modestly—and therefore favorably affecting material handling equipment manufacturing (MHEM). But there’s nothing robust about this growth, according to the Material Handling Industry of America’s (MHIA) latest MHEM forecast, developed by Hal Vandiver, MHIA's executive consultant.

Much depends on residential and non-residential construction which, if forecasts hold, will contribute greatly to positive growth in 2014 and beyond, Vandiver believes.

• MHEM new orders grew 24.2% in 2011. The outlook for 2012 is for growth at 8.0 to 9.0% and 6.0% for 2013 with continued growth in 2014 (but with some downside risk).

• MHEM shipments grew 19.6% in 2011. The outlook for 2012 is to grow in the 9.0%, 7.5% in 2013 and about the same in 2014.

• MHEM domestic demand grew 21.2% in 2011. Domestic demand (shipments plus imports less exports) will likely mirror shipment growth in 2012, 2013 and 2014.

“We now assume another round of quantitative easing from the Federal Reserve,” Vandiver concluded. “Although the United States still looks in better shape than the rest of the world, the headline ISM manufacturing index joined many similar indexes elsewhere below the breakeven 50 mark. And employment growth was disappointing again in June, at just 80,000, its third successive month below 100,000. Central banks around the world are cutting interest rates, or extending unconventional easing, but it is not clear how powerful that monetary medicine will prove, especially since interest rates in the developed world are already close to zero.”

In summary, although the recovery has lost momentum, it has not ground to a halt. U.S. GDP growth forecasts have been cut slightly for 2012 (to 2.0%, from 2.1%) and 2013 (also to 2.0%, from 2.1%). A deeper Eurozone recession and a harder landing in China remain the principal downside risks. The MHEM forecast raised the U.S. recession risk to 25%, from 20%.

Related Editorial:

U.S. Manufacturers More Upbeat about Domestic than Global Economy

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Pay Increases for Manufacturing up Slightly

June Equipment Financing Up 10 Percent

Logistics Numbers Reflect Summer Dog Days

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