In concert with most of the U.S economy, the Materials Handling Industry lost some momentum as we entered the early days of the new millennium. It now appears likely that both industry orders and shipments volume will be lower this year than over the past 2 years. But the downturn should be relatively shallow and short-lived, with a strong recovery becoming established by the spring of 2002.

The exclusive Modern Materials Handling magazine index of orders declined by an estimated 12.0% between the third and fourth quarters of 2000. For the whole year, however, our composite index showed total orders up a modest 2.4% from 1999's already-high level.

The trends in orders being placed with industrial trucks and conveyors turned sharply lower over the final months of 2000 after holding up well throughout most of the year. (They are the two most important industries that make up our comprehensive materials handling industry index.)

December 2000 industrial truck orders were 14.4% lower than during the final month of 1999, and total orders for the final quarter of last year were 8.1% below the fourth-quarter 1999 total. Nevertheless, for the full 12 months of 2000, the ITA order index gained 7.2% – even better than the 6.5% growth rate recorded during 1999.

The orders numbers coming out of the Conveyor Equipment Manufacturers Association (CEMA) survey showed a similar weakening pattern, although the fourth-quarter drop was decidedly more abrupt for conveyors than for lift trucks. Unit handling conveyor orders plunged 45.5% between the third and fourth quarters of last year. Although, the magnitude of the decline was made more dramatic by the exceptional and unsustainably strong orders volume recorded during the July-September period. Unit handling orders this past December were 40.2% lower than during the final month of 1999, and the fourth-quarter orders total for 2000 was 30% below the level reached during the final quarter of 1999. Nevertheless, taken as a whole, 2000 was another stellar year for the industry: Unit handling orders volume expanded by a cumulative 16.0%, after soaring 34.1% between 1998 and 1999.

These late-in-the-year declines shouldn't have come as much of a surprise in light of the well-publicized consumer spending and capital spending trends in the broader economy. Overall economic growth (as measured by total Gross Domestic Product) moderated during the second half of 2000, and is likely to be almost stagnant during the first half of the new year. And weakening growth rates for business investment spending will be an important part of this phenomenon, just as they have been an important driver during the nation's record-long period of economic expansion.

Although the odds of a full-blown recession during 2001 have increased substantially in recent months, they're still less than 50/50. Declines in orders to the materials handling industry should be relatively small – a controlled descent, not a free fall, from the gloriously healthy levels achieved during 1999-2000.