Equipment orders strong during first half of 2000

By by DARYL DELANO, Delano Data Insights -- Modern Materials Handling, 10/1/2000

The exclusive Modern Materials Handling magazine index of orders showed a 13.9% increase during the first half of 2000 on a year-to-year basis. In other words, the materials handling industry continues to show signs of healthy growth even after a strong 1999. However, there are signs that the rate of growth may moderate somewhat for the balance of 2000 and into the first half of 2001.

For instance, the overall index for the first 3 months of 2000 was 18.8% stronger than during the first quarter of 1999. But this year's second quarter index of orders beat the 1999 reading by just 8.9%-showing the slowest over-the-year growth of the past year. It is worth noting that some of this drop off in growth rate can be attributed to normal seasonal trends.

Trends in year-to-date orders placed with the two most important industries in our comprehensive index-industrial trucks and conveyors-continued positive through the middle of 2000, but there was some evidence of an underlying weakening trend.

Through the first 7 months of 2000, the Industrial Truck Association (ITA) order index ran a cumulative 17.3% ahead of the 1999 pace. However, second quarter 2000 industrial truck orders were 10.1% lower than in the first 3 months of the year.

Despite the solid year-to-date totals, it's noteworthy that in 2 of 4 months industrial truck order volume fell below its level for the same month a year earlier. April's total came up 12.1% short and July orders were 8.9% lower. This might suggest that slower growth would seem to be in the cards for the months ahead.

To say the least, unit handling conveyors had a sensational first quarter, with March numbers in particular 50% above their year-earlier levels. As a result, the January-March total would have been tough to match, and it wasn't. In fact, unit handling conveyor orders plunged 19.7% between the first and second quarters of 2000.

Also significant is the fact that unit handling orders in May and June of this year came in about 5% below the total for the same two months of 1999-the first time that we've seen two consecutive down months since October-November of 1998.

When these numbers were mixed in with those for bulk handling conveyors, the all-inclusive conveyor orders index was 15.5% greater during the second quarter of 2000 compared to the same period in 1999. However, the overall index also dropped 13.7% between the first two quarters of this year. Combine this with early strength in bulk handling conveyors giving way to some slowing, and the MMH index of orders continues to show growth for the industry. But, there's every reason to believe that we've passed this cycle's peak.

These trends may well mirror what is happening in economic growth as measured by total Gross Domestic Product. This will almost surely moderate during the second half of this year and some weakening in business investment spending growth will be part of this.

Nevertheless, expect to see modest growth in our materials handling orders index during the next year or so, just less, in percentage terms, than we've grown accustomed to during the past couple of years.