MHI Solutions

Economic Market Update

ECONOMIC MARKET ANALYSIS: Outlook Is Strong for Material Handling Industry in 2018

The outlook for the U.S. economy, global economy and material handling is strong for 2018.

By Jason Schenker

Leading economic activity data, low interest rates, favorable tax policies in the United States, a falling greenback, and solid equity markets were all positive dynamics coming together to push material handling orders and overall activity to strong levels at the start of 2018. And a mix of these factors continue to provide reasons to be optimistic about growth overall throughout the year.

Global growth and purchasing manager index (PMI) data are supportive of material handling activity The U.S. ISM Manufacturing Index, the Eurozone Manufacturing PMI, and the Chinese Caixin Manufacturing PMI all conveyed growth at the end of 2017, with the Eurozone Manufacturing PMI at a record all-time high in December 2017, very strong expansion in the U.S. ISM, and continued growth in the Chinese Caixin. These leading indicators provided strong tailwinds for growth going into the start of the year.

In January, the International Monetary Fund (IMF) also raised its forecasts of global growth for 2018 and 2019 from 3.7 percent to 3.9 percent. This is a very strong economic growth rate.

In January, the International Monetary Fund (IMF) also raised its forecasts of global growth for 2018 and 2019 from 3.7 percent to 3.9 percent. This is a very strong economic growth rate.

In addition to PMIs and IMF global growth expectations, the New Orders series for the MHI Business Activity Index (BAI) also showed two consecutive record high levels at the end of 2017, when 71 percent of respondents reported rising new orders. This very industry-specific data series offers the best glimpse into the health of material handling and it also presented strong tailwinds at the end of 2017 for the first part of 2018. The most important data to watch with forward-looking implications for material handling are global PMIs and the MHI BAI.

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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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