Labor costs rise in most materials handling markets; prices to follow
Here are data and forecasts on orders for conveyors and industrial trucks as well as prices for materials handling equipment.; Materials handling orders should be up 9.5% by the end of 1999 compared to the year-ago period.
By Elizabeth Baatz -- Modern Materials Handling, 10/1/1999
A strong economy and a rebounding manufacturing sector continue to feed growth in the materials handling markets. As a result, labor tightness is now reportedly starting to have an effect on the economy in general and the materials handling marketplace in particular.Looking at our exclusive MMH index of orders, we saw a 2.7% gain in the second quarter of 1999 from year-ago levels. By the end of 1999, we forecast orders will be up 9.5%.
The impetus for this orders gain has been apparent both in the conveyor equipment and the industrial truck industries. Trade association statistics show new orders for unit handling conveyor equipment rose an estimated 16% between the second quarter of 1998 and the second quarter of 1999. In the first quarter of 1999, orders for unit handling conveyors soared 25% from year-ago levels. By the end of 1999, unit handling conveyor equipment orders are expected to rise 9%.
New orders for industrial trucks likewise grew 8% between the second quarter of 1998 and the second quarter of 1999, according to data from the Industrial Truck Association. We predict that when all the numbers are in for 1999, thanks to sharp order declines at the start of the year, truck orders will be flat come December.
With the economy and materials handling markets advancing at a fairly brisk pace, labor costs in the materials handling industries have begun to show signs of heating up now, too. In the 12-month period ending July 1999, for example, direct labor costs in the conveyor equipment manufacturing industry rose 3.6%, up from 2.2% a year ago. Manufacturers of hoists, cranes, and monorails also saw production labor costs rise at a 3.3% rate, up from 2.6% a year earlier. Only the industrial trucks industry seemed to escape some of the burden of higher labor costs; its costs rose just 2% in the 12-months ending July 1999, less than the 3% gain a year earlier.
By region, manufacturers in Michigan seem to be seeing the fastest rising manufacturing wages, up 8.6% in July 1999 compared to a year ago. Wages in Ohio, up 4.8%, also grew at faster than the average pace, a 3.5% gain nationally over the year. In Minneapolis, a very strong construction market has been putting pressure on wages.
Higher labor costs combined with increased inflation in industrial commodities means prices for materials handling equipment will probably be rising through the rest of the year. On average these prices rose 1.3% (chart). Indeed, some product lines have already demonstrated a great propensity for higher prices. Looking at July 1999 prices compared to a year ago, some of the largest product prce hikes seen so far include: pneumatic bulk handling conveyors (up 5%), loading and storing systems (up 4.5%), motorized hand trucks (up 4.1%), hoists (up 3.1%), and heavy-duty, powered unit handling conveyors (up 1.6%).
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