Upside Potential for Manufacturing and Growth for Second Half of 2024

Economic Market Analysis
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Global manufacturing and growth were under significant pressure in 2023 and early 2024. But the prospects for the second half of 2024 are more favorable. Despite elevated interest rates, U.S. and Chinese manufacturing PMIs picked up in late Q1 2024, hinting at more upside ahead this year. For MHI member companies, the forward-looking Future New Orders series of the MHI BAI has been pointing to improvements in the second half of 2024. With solid prospects of falling inflation and interest rates, cautious optimism seems reasonable for material handling equipment manufacturers.

upside potential for manufacturing

U.S. Growth Advantage

There’s even better news for MHI members focused on the U.S. domestic market. While global economic dynamics have been spotty over the past 18 months, the U.S. economy is in a far more cherished position, with U.S. growth poised to reflect the strongest growth rate among advanced economies for the third year in a row in 2024. What is the most positive factor shaping the U.S. and material handling outlooks? The U.S. job market, which has remained relatively strong despite high interest rates and some fluctuating unemployment rate data.

A solid U.S. labor market is good news for GDP growth, retail consumption, e-commerce demand and material handling. After all, people with jobs buy stuff, and the convenience of e-commerce is not something consumers will easily abandon. These dynamics could be setting up material handling for more positive dynamics in the second half of the year—especially if interest rate cuts come to fruition along the lines communicated by the U.S. Federal Reserve.

Anticipating Risks of Economic Spoilers

Despite solid growth and job dynamics, some potential spoilers could upend an otherwise enviable U.S. economic outlook among Organization for Economic Cooperation and Development (OECD) economies. At the top of the list are Cold War Two geopolitical risks and U.S. domestic politics associated with the 2024 presidential election.

Cold War Two risks could be the most disruptive for the global outlook. Ongoing conflicts and the prospects of fractal conflict system dynamics that could give rise to additional conflicts threaten everything from manufacturing supply chains and oil prices to inflation, tech industries, electric vehicle battery supply chains and prospects for growth in the global economy.

Over the past year, U.S. domestic politics has exacerbated geopolitical and economic stability risks. The backdrop of U.S. political gridlock has eroded American abilities to project effective global conflict deterrence. Severe delays in passing the 2023 appropriation bills, the protracted period in 2023 when the House lacked a Speaker, and delays in passing aid legislation to help Ukraine, Israel and Taiwan have telegraphed to the rest of the world that Congress’ ability to enact critical legislation has become questionable at times due to partisanship and political jockeying. Plus, those are just the visible political risks before we consider the risks surrounding the upcoming 2024 presidential election, which looks set to be a real nail-biter.

Potential U.S. Election Outlook Shockwaves

Economic and political analysts are loathe to say that “this time is different” when making forecasts. However, third-party candidates and the aftermath of the 2020 presidential election reveal the potential for surprises this election season. A lot is on the line this fall, from foreign policy and geopolitics to potentially significant changes in tax policy and tax rates for individuals and corporations. Most important for MHI member companies and their customers are the financial implications of political control.

Republican control after the election would likely result in making the Trump tax cuts permanent, while Democratic party control would likely result in both higher corporate and individual tax rates. Of course, fulfilling such campaign promises requires control of more than just the presidency—and securing across-the-board control of the Presidency, the House and the Senate is difficult to achieve in any election cycle. This seems like an incredibly challenging hurdle to clear heading into an election with an apparent lack of groundswell enthusiasm for either candidate among independents or across party lines.

This means the U.S. will likely face more political gridlock in 2025 and beyond. Necessary compromises on tax policy and foreign military aid are likely to prove frustratingly difficult to achieve, leading to elevated prospects of potential future government shutdowns.

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