A new president elect has been decided, Republicans control all three branches of government, Brexit happened and the U.S. economy keeps chugging along. The question now is at what pace will the economy move and in what direction?
It has been a brutal presidential election, there have also been many hard fought and expensive congressional races across the country. The electorate has spoken and now we must move forward as a country. As an industry organization, we are positioning ourselves for the new political environment and Administration. Tax reform, regulatory change, trade and a host of other issues will certainly be on the agenda in 2017. These issues will affect our economic environments, markets and industry is why we need to be ready for change.
It’s hard to characterize overall U.S. economic activity in one sentence or phrase but “cautious stability” seems to capture a common sentiment expressed regarding current conditions with some economists predicting a stronger outlook for the remainder of 2016. Last year during this period we witnessed dramatic swings in the U.S. stock market with steep declines followed by strong recoveries. In 2016 we are not seeing the same volatility that we did in 2015.
The U.S. Labor Department stated in August “that the economy in July delivered a second consecutive month of robust hiring and rising wages in a signal that the expansion is strengthening, not ebbing, as it enters its eighth year.” Contrast this statement with the fact that the U.S. economy grew at an annual rate of 1.2 percent for the first half of 2016 and estimates of overall growth in 2016 to be approximately 1.4 percent – 2.0 percent (according several sources) the term “cautious stability” becomes a good description of our current economic conditions.
An accurate reading of the U.S. economy relies on many data points with one indication being real GDP growth. Real gross domestic product (GDP) is defined as an “inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.” Real GDP can account for changes in price level and provide a more accurate figure of economic growth.
One thing that has helped bring some stability to the U.S. economy has been the recently reported stronger real GDP growth. The estimate of growth in the U.S. economy was 1.2% during the second quarter, an increase over first quarter growth of 0.8% in the latest report from the U.S. Bureau of Economic Analysis.
When you look at the details of the GDP data, it is interesting to note that “Personal Consumption” has been the catalyst of the recent GDP growth in the U.S. Personal Consumption accounts for 67% of the recent growth and could be a force behind helping to maintain our strong lift truck industry performance.
The U.S. Labor Department says the U.S. economy added 255,000 jobs in July, following a gain of 292,000 in June, resulting in a two month average of 273,500.
Manufacturing sector employment rose by 9,000 during July. Transportation equipment manufacturing employment increased by 12,000 mainly due to motor vehicles and parts.
In a separate survey, the Labor Department’s Bureau of Labor Statistics said the unemployment rate was steady at 4.9 percent on the heels of a 9 year low set in June of 2016. To put this into some context it is helpful to look at a snapshot from 6 years ago at the height of the recession where unemployment stood at 10% to where we are now at 4.9%.
The big question now is whether the Federal Reserve will decide to raise interest rates during its last meeting in 2016? Many experts have expressed confidence that the Federal Reserve is likely to raise interest rates and certainly statements from Federal Reserve Chair Janet Yellen supports these views.
Overall U.S. manufacturers are seeking to maintain the strong recovery. New orders for manufactured durable goods in July increased $9.7 billion or 4.4% to $228.9 billion, the U.S. Census Bureau announced in August. This increase, follows two consecutive monthly decreases including the 4.2% June decrease.
Excluding transportation, new orders increased 1.5%. Excluding defense, new orders increased 3.8%. Transportation equipment was also up following two consecutive monthly decreases which led the increase with $7.5 billion or 10.5% to $78.9 billion.
However, reduced crude oil prices, the strong dollar and weakness in certain markets around the world could be seen as taking their toll on demand and production for export products. The U.S. Department of Commerce reported that the trade deficit grew by $3.6 billion in June to $44.5 billion, an increase of 8.5 percent over the revised May figure of $41 billion. However, it is important to note that the trade deficit is running 2.3% below last year’s level, reflecting a larger decrease in imports compared to exports.
Automobile Sales continue to be a bright spot in U.S. manufacturing. A senior analyst’s forecast for 2016 light-vehicle sales is 17.4 million units, a decline of 0.1% compared to 2015. The industry’s all-time record is 17.47 million cars and light trucks, set in the year 2015. Second half sales, which propelled the industry to record levels last year, will determine whether the automotive industry will maintain its predicted strength for 2016. The automotive industry appears to remain healthy.
2015 was a record setting year for the U.S. forklift industry with approximately 226,000 units sold. This growth speaks well of the current business environment our industry is enjoying and also reminds U.S. of how prevalent our products are in all facets of our economy.
Looking forward, 2016 has been another strong year for our industry as retail orders are near the record setting levels of last year. Year-to-date, our industry is at a similar level now when compared to last year and we are expecting industry performance to be similar to last year for the remainder of the year.
The 3rd annual National Forklift Safety Day (originally launched in 2014) was held this past June in Washington, DC. This day provides an opportunity for the industry to raise awareness and educate customers, policymakers and U.S. government officials on forklift operating safety practices. We welcomed speeches from influential members of Washington and industry experts during the event.
ITA member’s supported National Forklift Safety Day this year across the country by hosting open houses, providing free operator training classes as well as distributing safety materials.
Through these efforts and the efforts of our official media sponsor we are able to generate a considerable amount of media coverage that included circulation numbers from all of the media outlets that exceeded 60 million. The next National Forklift Safety Day will be held in Washington, DC on June 13, 2017.
A new project at the ITA that we are undertaking is to quantify our industry’s contribution to the U.S. economy. We recently partnered with Oxford Economics to conduct a study that will provide a synopsis of the U.S. powered industrial truck industry based on a statistical analysis and an industry survey. This information will be used to evaluate the contribution of the U.S. industrial truck industry by quantifying the direct, indirect and associated impacts that our businesses have on the U.S. economy.
Now with the political elections behind U.S. and “cautious stability” in the markets, we now prepare for a new political climate in Washington and around the world. Individually we can make positive contributions to society every day. Collectively, as a unified industry, we have the opportunity to shape the direction for many years to come.