Demand for materials handling equipment remains strong

By Staff -- Modern Materials Handling, 7/1/2006

While the overall U.S. economy is slowing down, the materials handling sector continues to enjoy a growth phase. Orders of materials handling equipment were up 29% in 2005, according to the U.S. Census Bureau. And orders in the first quarter of 2006 were up 21% compared to the same period last year, according to the bureau's seasonally adjusted data.

Modern's Orders Index hit an all-time high in February and has dropped just slightly since then.

MHIA predicts materials handling equipment manufacturing will remain in this growth phase through 2007, with growth slowing to 11 to 13% this year and to 3.5 to 5% in 2007. This is typical behavior, according to MHIA, for the cyclical materials handling equipment market.

Meanwhile, U.S. economic growth is slowing as it nears the end of a long business expansion. Gross domestic product (GDP) increased 5.3% in the first quarter of 2006, but that number paints a misleadingly rosy picture, says Jim Haughey, an economist for Reed Business Information, parent company of Modern.

Growth slowed considerably in the second quarter after the big post-hurricane rebound, he adds, and appears to be near 3% now. Haughey predicts that rate will stay near 3% through 2007.

Falling unemployment and rising use of manufacturing capacity mean the economy has very little reserve labor and equipment. As a consequence, says Haughey, supplies of workers and equipment will become tighter through the summer. And the pressure to raise prices and wages will continue well into 2007.