Mixed Economic Reports for Industry and Consumers

April 13, 2011
Material handling equipment manufacturers are enjoying an uptick in demand for their products while the purchasing power of the consumers of the goods handled by that equipment is destined for a downswing, according to two new reports.

A new Material Handling Equipment Manufacturing (MHEM) forecast put out by the Material Handling Industry of America indicates the manufacture of this equipment will vacillate between accelerating and decelerating growth over the next twelve to eighteen months. Manufacturing utilization is the key.

As utilization approaches 80%, the economy is said to be expanding. According to the MHEM forecast, utilization is forecasted to hit 75.0% in the second quarter of 2011 and will return to its prerecession pace in 2012. Demand is shifting from recovery mode (filling supply chain pipelines, re-establishing inventories, and responding to pent up demand) to near normal levels, the forecast claims.

“MHEM will benefit from demand for more efficient use of capacity in warehousing, distribution and manufacturing in the near term and expanding residential and non-residential building sectors in late 2012, early 2013,” the report states.

The outlook for 2011/1012 is for growth in material handling equipment manufacturing in the 11.0 to 12.0% range. Shipments are expected to grow between 12.0 and 13.0%.

Domestic Demand for material handling equipment (shipments plus imports less exports) will likely mirror 2010, when it grew 3.6%. However, exports will be stronger than imports in 2011. On the consumer side, according to a new survey of retail goods manufacturers and importers, the cost of consumer goods at retail is likely to rise by 10 to 15 percent later this spring and into the summer, particularly in the apparel and home furnishings segments.

The Global Retail Manufacturers and Importers Survey, conducted by Capital Business Credit LLC (CBC), indicates this increase is due to spikes in commodities and logistics costs. More than half (62 percent) of respondents said that their logistics costs have increased by more than 5 percent in the past year. Of those who identified an increase in logistics costs, almost two-thirds (64.1 percent) are passing at least some portion of the increased cost along to the retailer and consumer, causing retail prices to escalate even more. For manufacturers and importers the rise in oil prices (89.6 percent) as well as the conflicts in Egypt and Libya (62.5 percent) is the driving force behind this increase.

The CBC survey reports that, to deal with the increased cost of logistics, 35.9 percent of manufacturers and importers are absorbing the cost, 28.2 percent are passing along this cost to the retailer/customer and 35.9 percent are absorbing some of the cost as well as passing some of the cost along.

“The rising cost of logistics will have a significant effect on manufacturers, importers, retailers and consumers,” the CBC Report’s authors conclude. “Margins will be cut and prices will increase, causing stresses and cracks along the entire supply chain. Current events will only amplify these already existing problems.”

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