MHI Solutions

Economic Market Update

ECONOMIC MARKET ANALYSIS

U.S. and Global Outlook Remain Positive for Material Handling and the Overall Economy

By Jason Schenker, CMT, CFP, ERP, CVA, Prestige Economics, LLC

The outlook for material handling remains positive, as long as the outlook for the U.S. economy remains positive. In a recent analysis, we found that nominal U.S. GDP is over 90 percent correlated with material handling. This shouldn’t be a surprise. After all, if material handling is the industry that makes the supply chain work, and the macroeconomy is growing, then the demand on the supply chain—and the demand for material handling equipment and technology—should rise.

Optimism about U.S. growth improved at the end of 2016 and through the first half of 2017 on the hope of stimulative fiscal policies, including U.S. corporate tax cuts and additional government spending on infrastructure. This proved supportive of business investment, and this has been supportive for material handling in the United States.

Beyond the United States, the outlook for the global economy has also improved. International Monetary Fund (IMF) growth forecasts reflect expectations of accelerating global GDP growth in 2017 and 2018, compared to the relatively tepid growth rate of only 3.1 percent in 2016.  While 3.1 percent is normally considered a strong GDP growth rate, it is a tepid rate for global growth, because global population growth is generally considered sufficient to achieve 3 percent year over year annual global GDP growth. In other words, the 2016 global growth rate of 3.1 percent barely exceeded the contributions from global population growth.

The outlook is more positive for the balance of 2017 and 2018. Against this backdrop of upside growth potential, we see upside potential for overall material handling new orders for the balance of 2017 as well, with more significant upside potential for material handling new orders in 2018.

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According to the recently released 2018 MHI Annual Industry Report, “Overcoming Barriers to NextGen Supply Chain Adoption,” eight out of ten survey respondents believe these supply chains will be the predominant model within just five years. However, the report found that the adoption of some of these technologies was slower than originally reported when MHI started the annual report in 2014. The report cites three top barriers to adoption of these technologies: 1. Making the business case for NextGen supply chain investments. 2. Tackling the supply chain skills gap and workforce shortage. 3. Building trust and security in digital, always-on supply chains. This issue of MHI Solutions focuses on the adoption of these digital solutions, from best practices in robotics and artificial intelligence to blockchain and innovations in last mile delivery.

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