Cycle Dynamics

What goes around comes around in the material handling business. Although material handling equipment manufacturing will decline 12%-14% in 2002, full-year positive growth in new orders can be expected in 2003 at the rate of 7%-9%, according to the Material Handling Industry of America’s updated MHEM forecast. The May 2002 update relied on statistical data provided by a panel of 30 forecasters from the National Association for Business Economics.

Consistent leading indicators for several cycles over the eight-year period from 1994 to 2001 show that 9-21 months after an economic series bottoms out, material handling equipment manufacturing consistently will do the same. Each of the available leading indicators has now entered the next cycle phase, and projections of an uptick are based on these macroeconomic trends.

The update indicates that profits and business investment are current weaknesses in the material handling equipment manufacturing sector. In spite of the recent economic downturn, especially since Sept. 11 last year, the forecast calls for 3.5% growth in manufacturing through the end of 2003.

The economists expect the MHEM cycle to begin an upturn in the second quarter of 2002, continuing into 2003, with production volumes for that period likely to be typical of levels for 1995-1999. One consistent note: The net balance of trade will remain negative, as it has since 1998.

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