MHI Solutions Improving Supply Chain Performance
THE U.S. AND global economic outlooks have darkened following the onset of the war between the United States and Iran and the accompanying rise in oil prices. Geopolitics and Cold War Two tensions remain the biggest risks to markets and the economy, increasing the likelihood of slower growth and higher inflation tied to elevated energy prices. Even if this conflict were to end immediately, energy prices would likely remain elevated due to damage to global oil and gas production assets and transport infrastructure.
Despite significant macroeconomic risks, the outlook for material handling and manufacturing is more nuanced. Prioritized structural macro tailwinds tied to supply chains, reindustrialization and economic mobilization present upside opportunities.
GLOBAL BACKDROP AND INDUSTRIAL DEMAND
The International Monetary Fund’s (IMF’s) growth forecasts in April 2026 were revised downward, although they remained positive. The April 2026 IMF World Economic Outlook (WEO) projected global real gross domestic product (GDP) growth of 3.1% in 2026 and 3.2% in 2027, following a stronger 3.4% growth rate in 2025. The war with Iran is a key factor that influenced the IMF’s decision to lower its global growth forecasts.
Even with slower global growth, manufacturing activity has remained relatively firm. For material handling firms and manufacturers, this environment reveals a key takeaway: slower growth does not mean weaker logistics demand. In fact, supply chain complexity and regionalization are poised to increase as global supply chains bifurcate further, and corporations increasingly seek to insulate themselves from Cold War Two geopolitical and disruption risks.
U.S. GROWTH, ROLE OF CONSUMPTION AND LABOR MARKET DYNAMICS
U.S. real GDP growth expanded in Q1 2026 by 2.0%, following a slower 0.5% real GDP growth rate in Q4 2025. Around 69.2% of Q1 GDP was consumption, which is why job gains are so important for growth. Payrolls have weakened significantly, contracting in five of the ten months through March 2026.
For manufacturing and supply chains, the implication is clear: consumption‑driven demand remains a core support, but risks are rising. Any deterioration in the labor market could quickly weaken goods movement, inventory turnover and capital investment. Data in the monthly MHI Business Activity Index (BAI) has often reflected improved hiring ease. However, despite this improvement, finding qualified workers remains a persistent challenge for many businesses in the material handling industry.
One of the industry’s biggest challenges remains the tight labor market for physically demanding, in‑person roles. Additionally, there is likely to be significant ongoing future demand for material handling equipment, warehouse automation and logistics optimization.
INFLATION, INTEREST RATES AND INVESTMENT DECISIONS
Following the conflict with Iran, surging oil prices accelerated year‑over‑year U.S. consumer inflation. As of March 2026, total consumer price index (CPI) inflation reached 3.3%, while core CPI, which excludes food and energy, stood at 2.6%. Total personal consumption expenditures (PCE) inflation rose 3.5%, with core PCE at 3.2%. These levels are all well above the 2% target of the Federal Reserve.
With weak recent payroll gains, we still expect the Federal Reserve to cut interest rates in 2026. However, elevated oil prices may limit the Federal Reserve’s flexibility, prompting the Federal Open Market Committee to leave interest rates unchanged until the labor market weakens significantly.