By George Prest, CEO, MHI
There are many reasons to be optimistic in the year ahead as MHI is predicting overall growth in Material Handling Equipment Manufacturing (MHEM) for 2018 and 2019.
The economic outlook in the latter half of 2017 was generally positive, the International Monetary Fund (IMF) raised its global growth forecasts, and leading indicators – like global purchasing manager indices – were indicative of future growth. One of the major risks to this predicted growth is U.S. fiscal policy. If markets and businesses believe enough groundwork has been laid by fiscal policy to ensure strong growth, then the economy could see additional upside surprises in 2018.
Upside and downside risks for the industrial part of the material handling industry will be intrinsically linked in 2018 to the health of the economy and U.S. tax policy. On the upside, the global economic outlook for 2018 is looking very strong with solid manufacturing purchasing manager indices (PMIs) out of the United States, the Eurozone, and China.
The automation side of material handling is likely to continue to experience growth at an accelerated pace. Technology and innovation have become core parts of most business strategies, and the percent of retail sales attributable to e-commerce has been steadily rising. Through the second quarter of 2017, 8.9 percent of all retail sales could be attributed to e-commerce. We see the potential for businesses tied to e-commerce to remain relatively evergreen, as the absolute level of sales and the percent of retail sales are likely to be significantly higher in just a few years.
New Orders are expected to rise for 2017 (by $2.5 billion) to a record level of $34.8 billion.
New Orders are predicted to rise to $36.2 billion in 2018 and to $37.4 billion in 2018.
Shipments are expected to rise in 2017 (by +$2.6 billion) to a record $34.2 billion, and they are also expected to rise in 2018 to $35.6 billion and continue to rise to $36.8 billion in 2019.
Domestic Demand is expected to rise in 2017 (by $3.1 billion) to a new record of $36.8 billion and continue to rise to $37.7 billion in 2018 and $38.7 billion in 2019.
Imports are expected to rise in 2017 to $7.5 billion, while exports rise to $4.9 billion. Imports are expected to rise to $7.6 billion while exports will rise to $5.5 billion in 2018.
Overall economic growth forecasted to continue in 2018
U.S. and global economic growth are likely to continue in 2018. But the U.S. economy is exposed to downside risks associated with fiscal policy disappointment. Parts of material handling may prove economically agnostic, as e-commerce continues to experience unabated growth. The dollar faces some downside risks, while interest rates globally face upside risks, and commodity prices could rise further with continued global growth.
The most important leading indicators of economy growth will remain critical PMIs. For material handling, the most important indicator to watch remains the MHI Business Activity Index (BAI). Readings above 50 support the outlook for growth, while multiple readings below 50 would be a cause for concern.
My advice to all in our industry is to keep a sharp eye on the disruptors to the economy, for example artificial intelligence (AI) which is going to be significant in the next couple of years.
Trade Events are Positive Indicators
MODEX 2018 will be presented in Atlanta from April 9-12 at the Georgia World Congress Center. MODEX has seen positive growth and will showcase for the first time on two show floors (Georgia World Congress B and C Halls) with over 850 exhibitors.
We are also seeing record interest in our exhibit space selection for ProMat in 2019. Such activity signals confidence in the economy and our industry.
You can learn more about MHI and our programming at MHI.org.