By Brian Feehan, President, ITA
In the aftermath of the midterm elections, the balance of power in the US Senate has changed hands. What impact will that have on business, tax structure, regulations and overall economic activity? Will this slim majority break the deadlock in Washington? How will the markets react?
US Economic Activity
Let me start with a high level overview of the current economic conditions in the US. Let me also caution that, as we all know, news and forecasts about today’s economic environment can vary quickly.
The Federal Reserve announced real GDP increased by a healthy 4.0 percent in the second quarter of 2014, more than offsetting the 2.1 percent drop in output during the first quarter. Consumer and business spending contributed to the higher figure. Inventory investments alone contributed one-third of the growth in real GDP for the quarter, with higher investment levels for housing and nonresidential structures.
Even with the strong second quarter – real GDP rose by only 0.9 percent for the first half of 2014. Fortunately, the good news is that manufacturers are cautiously upbeat about future growth. The Federal Reserve’s March projections in real GDP for 2014 issued this past June report a 2.8 percent to 3.0 percent annual growth.
Inflation has moved up in the recent months but remains below the Federal Open Market Committee’s (FOMC) 2 percent target for inflation over the longer run. The 2014 estimate for core inflation (stripping out food and energy price changes) rose 1.5 percent. FOMC projects that both total and core inflation will be between 1-1/2 and 1-3/4 percent for this year as a whole.
The National Association of Manufacturers (NAM) states that “despite a weak start to 2014, there is an expectation among manufacturers that the second half of the year will be better than the first. Average manufacturing sales forecasts in the latest survey were the highest in two years, with capital investment and hiring plans also moving in the right direction. These data points were consistent with 4.0 percent production growth in the sector between now and the fourth quarter of this year, and roughly 86 percent of respondents were either somewhat or very positive in their outlook”. (Source: NAM)
These findings mirrored similarly optimistic assessments from business economists, who predict real GDP growth of 3 percent or more in each of the remaining quarters of 2014, with industrial production up 3.7 percent for the year as a whole.
Automatic Data Processing (ADP) announced its job estimates recently stating that private sector employment increased by 204,000 jobs from July to August.
Goods-producing employment rose by 41,000 jobs in August, an increase over its July growth rate. Within the goods producing sector; Construction payrolls added 15,000 jobs, while manufacturing payrolls increased by 23,000 jobs in August – the highest total in this sector since December 2012. (Source: ADP)
The Bureau of Labor Statistics (BLS) announced that the unemployment rate was 6.1 percent in August 2014. Employment levels in the US remains positive news and serves as another indicator that point to economic recovery.
The housing market was a positive contributor to economic growth this year, however, the residential market remains a challenge. Improvements in housing starts and permits have raised expectations and there were increases in both existing and new home sales in April.
Still, the housing market remains weaker today than it was several months ago. Existing home sales, for example, have dropped 13.6 percent since peaking in November of 2013, and new single-family home sales have declined 3.9 percent since January of this year.
Another set of data that we looked at is the Institute for Supply Management’s September Manufacturing ISM Report. This is a widely followed report because analysts believe it provides them an advance look at manufacturing conditions and outlook that government reports won’t cover for another several weeks. It is important for us to recognize this report does not track hard data but the present situation in a number of industries derived from a survey of purchasing managers from those industries.
A reading over 50 from those surveyed indicates that a majority reported that conditions in their industry are improving. The September survey indicated faster expansion in August than in July, as the composite purchasing managers index (the PMI) rose to 59.0% in August up from the 57.1% in July and that is the highest reading since March 2011.
Automotive buying drove US retail sales higher in August, a possible sign that job growth in recent months has led to accelerated consumer spending. According to Ward’s Automotive (a leading automotive industry expert firm) an amazing 1.58 million motor vehicles were sold in August alone, giving the automotive industry its best August in 11 years. That represents a 5.4 percent increase in automotive buying over the past 12 months.
US Forklift Industry
In 2013 – total retail truck sales for classes 1 through 5 (gross numbers including all 5 classes and 5 market sectors – US, Canada, Mexico, federal government and export) was over 200,000 units. This compares to the approximately 197,000 total units for classes 1 through 5 in 2012. So we are seeing at the present time some stability in the market. In July 2014 we surveyed the ITA members – and – as a collective group we are forecasting total unit sales of truck classes 1 through 5 in 2014 to be approximately 190,000 to 200,000 units (excluding exports in this survey). Some of our most recent data that we have collected continues to support this forecast for 2014.
Currently most ITA members are optimistic concerning 2014 predicting 2- to 4-percent increase in overall demand.
The US forklift manufacturers continue to focus improving customer satisfaction through increased efficiency, technology and safety on the products being sold. Some of the market trends we expect to see are increases in the size of rental fleets as well as the continued use of fleet data products in a variety of applications. The continued drive for data to optimize fleet performance and efficiency is one trend likely to be around for some time.
As with most industry organizations – there is no lack of challenges and opportunities for us to address as a collective group. However, we must prioritize those challenges and opportunities and focus on the issues where we can be as efficient & effective as possible in recognizing our ability to positively impact issues of most concern to the industry.
Launched this past June – National Forklift Safety Day – that was held on June 10th in Washington, DC. National Forklift Safety Day was created to serve as a rallying point for our manufacturers and suppliers to highlight the importance and need for continued operator training. We are determined to use this day as a continuing opportunity to address critical priorities concerning forklift operator safety through improved education and training.
ITA members and the industry supported the launch of this initiative in many ways including; conducting operator training workshops, hosting open houses, distributing company press releases and conducting interviews with trade publications among many others. Through these efforts and the efforts of our official media sponsor we are able to generate a considerable amount of media coverage (actual circulation numbers exceed 20 million). National Forklift Safety Day will be held next year on June 9, 2015.
Another new initiative this year was that the ITA has officially requested that OSHA undertake an administrative proceeding to update the references in OSHA regulations dealing with powered industrial trucks to reference the latest national industry consensus standard. The current regulations reference the 1969 version of the B56.1 standard. The updated reference would be “ANSI/ITSDF B56.1-2012 SAFETY STANDARD FOR LOW LIFT AND HIGH LIFT TRUCKS, Part III.”
This would be a major step forward for our industry to update a reference to a nearly 45 year old standard.
Next year the ITA will be hosting the Alliance of Industrial Truck Organizations (AITO) and the World Industrial Statistics (WITS) meetings along with the President’s Forum during our Annual Meeting at the Breakers Hotel in Palm Beach, Florida.
Our international work on trade and tariffs, regulatory cooperation and market intelligence continues through our work win AITO. During the 17 years of its existence, the AITO has proved to be a useful tool in the dissemination of information about the global industrial truck market, including orders and shipments, rental markets, emerging markets and government programs covering a host of topics related to our industry. We are looking forward to hosting our colleagues from Europe, China and Japan next year and continuing our dialogue to support the global industry.