Everything and Nothing

Oct. 1, 2009
Experts at MHIA’s annual meeting say the worst is over, but economic recovery will be slow.

While attending the Material Handling Industry of America (MHIA) annual meeting in Amelia Island, Fla., earlier this month, I heard industry leaders from various material handling segments discuss the latest economic trends and offer opinions about the future.

After sorting through all the charts and numbers, I was sure of only one thing: These are the best of times and the worst of times.

A contradiction? Yes, but the days of certainty are long gone. Think about it: When was the last time you heard a straightforward, perfectly lucid economic forecast? At the MHIA meeting, experts culled from the major segments of material handling—conveyors, industrial racks, casters and wheeled devices, automation, supply chain execution systems, industrial trucks and overhead lifting equipment—all reported severe declines for their respective segments in 2009. But they also agree the bottom is behind us, and indications of a turnaround are clear.

Without a doubt, this is good news for material handling. The worst of the Great Recession is over, according to the experts. But the silver cloud has a dark lining. As Brian McNamara, president of Southworth International, colorfully put it as he presented the forecast for workplace safety and ergonomics, 2010 will feel like the long day after a three-day intestinal flu.

The material handling equipment manufacturing (MHEM) market does indeed resemble a patient recovering from a terrible illness. Because it encompasses a host of material handling equipment— elevators and moving stairways; conveyors and conveying equipment; overhead traveling cranes, hoists and monorail systems; and industrial trucks, tractors, mobile straddle carriers and stacker machinery—the MHEM outlook helps to shed light on overall conditions in the material handling equipment business.

Hal Vandiver, MHIA’s executive vice president of business development and presenter of the MHEM outlook, says a recovery is in process, but growth won’t start until early 2011. Call it a slow turnaround or, as MHIA sometimes says, a “decelerating decline.” The result is the same: Material handling has begun the journey to recovery, but it’s a long haul.

Vandiver considers new orders, shipments, unfilled orders, imports, exports, net trade and domestic demand in the first half of 2009, versus the same indicators in the first half of 2008. While 2008 recorded more declines than previous years, some indicators were still in the black. In the first half of 2009, all of them were in the red.

Given the whopping 44.9% total decline in the first half of 2009 compared to 2008, Vandiver predicts the full-year decline in new orders to be 35% to 38%. He forecasts a further drop of 5% to 10% in 2010 and says MHEM orders won’t rise until 2011. Shipments will contract 35% in 2009 and another 9.5% in 2010, while domestic demand will see a 2009 decline of about 35%.

This bitter outlook reflects the intensity of the damage inflicted over the past year. Vandiver points to historically low capacity utilization, significant lags in capital spending, continuing declines in consumer sentiment and persistent slumps in housing. Capacity utilization and consumer sentiment are generally the most accurate indicators of the state of material handling, he says, and notes that capacity utilization in 2009 was only 66%—the lowest level recorded since 1967.

Nevertheless, all speakers at the MHIA meeting encouraged material handling managers to resist the urge to hunker down in fear. Recessions are temporary, they remind us. We have everything before us and nothing before us. I never dreamed I’d be able to tie Charles Dickens to material handling. I guess in these uncertain times, anything is possible.