Putting Economic Risks in Context
* By Jason Schenker *
There are more risks this year than there were at this time last year—a lot more. Trade risks, political risks, geopolitical risks and even risks to global growth have all increased. But it is important to examine these risks in context, because while there are rising risks across the global economy, the U.S. economy has shown less downside potential than other major economies. And both U.S. growth and material handling equipment manufacturing activity are still coming off a strong year and will benefit from the growth tailwinds of 2018.
Despite a strong year of U.S. economic growth and material handling equipment manufacturing activity in 2018, risks at the beginning of 2019 were elevated. Those risks appear to be not unfounded. This year is shaping up to potentially be like 2015 or 2016, when the U.S. economy was buoyed by strong personal consumption, but business investment experienced contractions. Of course, the economy is different now, because interest rates are higher—even if the Fed has taken a more dovish stance in recent months. This presents more downside risks to housing, automotive sales and equipment sales than the much lower interest rate environment of 2015 and 2016. Plus, there are elevated political risks domestically, as well as heightened geopolitical risks associated with trade uncertainty.
The risk of a slower pace of U.S. growth, as well as a decline in the pace of U.S. material handling activity, remain significant through the rest of 2019 as well as in 2020. But before you reach for the hemlock, consider that the downside risks of the next 24 months do not present the same risks as the Great Recession of 2007-2009. It is important to remember that 2018 was a boom year for material handling—and a very strong year for U.S. economic GDP growth. In fact, 2018 was among the highest for any year since the Great Recession ended. Plus, the U.S. unemployment rate remains near lows not seen in decades.