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Supply Chain Graphic of the Week: 2017 to be Tough Year for Materials Handling Sales - and the Economy

 

Highly Respected Economist Sees US Falling into Mild Recession 1H 2017, Material Handling Orders to Drop 13.9% for Year

Oct. 26, 2016
SCDigest Editorial Staff

Materials handling equipment vendors should expect a tough year in 2017 - as sales pull back after a long stretch of pretty goods times- in the face of overall US recession next year.

 

That was the sober but very credible message from Jason Schenker, president of Prestige Economics and highly respected forecaster, at the MHI annual conference Tucson, AZ last week. Schenker and his firm have a business relationship with MHI, which includes an economic forecasting service for MHI members, as he has also spoken on his projections for the economy at the last three MHI conference events.

 

In great summary, Schenker sees numerous signs of US economic slowdown right now, and is expecting the US to fall into a relatively mild recession in the first half of 2017, with a small decline in real GDP for the year of -0.4% after a weak growth rate of 1.3% in 2016.

 

As always, the materials handling industry, highly cyclical, will feel the impact, and is indeed already starting to see volumes contract. Below you will find Schenker's numbers for materials handling equipment sector over the next several years.

 

US Material Handling Forecasts: 2017 Weakness
Leads Improvements in 2018 and 2019

 

 

Source: Prestige Economics

 

As can seen, after a big drop in new order growth in 2016 (to just 2.6%), Schenker expects US material handling sales to fall a sharp 13.9% in 2017. Most other forecasts for the industry are also negative.

 

Interestingly, in data from a monthly survey of MHI members by Prestige, the level of "unfilled orders" has been steadily declining, as shown below, dropping very sharply in September. That even as shipment levels have stayed somewhat strong, though lately the pace of shipment growth has really slowed.

 

 

Source: Prestige Economics

 

What does that mean? It means that for now, materials handling vendors are living off their order backlogs. But according to Schenker, that party will come to an end soon enough.

 

Plan accordingly.

 

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