Right now, it's hard to be very upbeat about the prospects for Materials Handling expenditures and other business investment spending.

A variety of sources – none quite as comprehensive as we'd like – suggest that the total value of shipments coming out of U.S. materials handling equipment manufacturers was dropping sharply through the first 6 months of this year. The sad fact is the exclusive Modern Materials Handling magazine index of orders declined by an estimated 9.0% between the first and second quarters of this year. And the April-June orders index level this year was 29.5% lower than during the same quarter of 2000.

After growing by 11.6% in 1999 and by 2.4% last year, we now expect that our composite orders index will fall by 22.7% over the course of 2001. If this (or worse), in fact, comes to pass, we will in 1 year have completely wiped out all of the gain recorded in the previous 2 years.

The trends in orders being placed with the two most important industries that make up our comprehensive materials handling industry index – industrial trucks and conveyors – turned sharply lower during the first half of 2001.

The Industrial Truck Association (ITA) reported that April-June 2001 industrial truck orders fell about 39.1% short of the second-quarter 2000 level. June 2001 industrial truck orders were 40.2% lower than during the sixth month of 2000. For the entire first half of the year, total orders were running 38.9% below the January-June 2000 total. These numbers come on the heels of 2 years when annual growth averaged about 7%.

The orders numbers coming out of the Conveyor Equipment Manufacturers Association (CEMA) survey showed a similar weakening growth pattern for conveyors during January-June 2001. The absolute orders level was much lower during the second quarter of this year than during the first 3 months of 2001. The total value of April-June orders this year was 30.5% below the second-quarter 2000 level.

Unit handling conveyor orders were 28.5% weaker this June than last June, off slightly less than overall industry orders which include the totals for bulk handling equipment. Second-quarter orders volume, in total, was 26.3% lower this year than last. But this over-the-year decline was less severe than Q1 of 2001 or the final quarter of 2000.

Since the second-quarter numbers came in on the low end of what we had predicted 3 months ago, we've had to revise our forecast downward to call for a contraction of 20%-25% in the total materials handling market this year. But we still believe that capital investment spending will pick up by the spring of next year. As a result, we're predicting a gain of almost 10% in our composite orders index during 2002. And we hope this forecast is conservative, given the uncertainties still surrounding the direction of the U.S. and global economies. On balance, though, it's our judgment that the market will have nowhere to go but up after a demoralizing performance during 2001.