ITR Economics sees the sales of material handling equipment rising in 2026 amid economic growth.
By Nick Fortuna
MAJOR CORPORATIONS ARE laying off employees, inflation is ticking up, consumer confidence is down and artificial intelligence is threatening to displace workers in many industries. But don’t tell Connor Lokar that the sky is falling.
Lokar, senior forecaster at ITR Economics, sees underlying strength in the economy and expects 2026 to be a strong year for the material handling industry. After two years of declining sales figures, he expects new orders for material handling equipment in the United States to reach $38 billion in 2026, up about 8% from the prior year.
Rising prices will account for a portion of that increase, of course, but “some of it will be volume,” Lokar said. New orders for material handling equipment dipped about 18% in 2024 after several years of gains, and entering November, Lokar estimated that 2025 sales would decline another 2% to 3%.
Over the prior 12 months, equipment sales in the United States totaled about $35.7 billion, and demand was picking up, fueling optimism for industry stakeholders, Lokar said.
“Orders were weak in 2024, and that weakness carried into this year, but when 2025 closed out, we saw momentum starting to improve,” he said. “I look at 2025 as setting the table for a better and more consistent year in 2026. All the data we’re looking at indicates a cyclical rise as we go into this year.”
Based in Manchester, New Hampshire, ITR Economics is a subsidiary of the Crowe LLP public accounting and consulting firm. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the United States, providing business leaders with economic analysis since 1948.
Lokar acknowledged that his view might seem overly rosy given recent headlines, but he stands by it. In late October, major brands such as Amazon, UPS, General Motors, Nestlé and Target announced they were laying off thousands of workers, suggesting the economy was weakening.
But hiring patterns tend to be a lagging indicator of economic activity, so those corporations were responding to weak demand in prior quarters, not predicting a rough year ahead, Lokar said.
“Most of the physical goods economy actually did experience a recession in 2023 and 2024,” he said. “Whether you’re looking at industrial production, manufacturing, wholesale trade of durable and nondurable goods or inflation-adjusted retail sales, we actually saw the economy endure quite a bit of weakness in 2023 and 2024.”
Growth Constrained by Instability
Lokar pointed to economic uncertainty surrounding tariffs as the principal reason why 2025 wasn’t a stronger year for the U.S. economy. That lingering uncertainty, combined with a combustible geopolitical environment, means economic predictions should be written in pencil rather than ink.
The war in Ukraine, the fragile truce in Gaza, Chinese aggression toward Taiwan, tensions between the United States and Venezuela and even domestic political unrest could lead to economic disruption. Still, Lokar said that barring new conflicts or other global shockwaves, 2026 should be a solid economic year.
“Our view may be contrary to the headline environment, but we’re seeing an economy that’s actually poised to improve in 2026,” he said. “The actual data are showing market segments that are recovering. Manufacturing is up after declining for two years and is accelerating heading into 2026, and if we look at real-time retail sales, we’re seeing the strongest growth rates on an inflation-adjusted basis since 2022.”
While Wall Street celebrates sky-high stock indices buoyed by the AI boom, Main Street is hurting. The Conference Board said its consumer confidence index fell to 94.6 in October from a September reading of 95.6, but a year earlier the index was 109.5, signaling that Americans are feeling less confident about their finances now.
Meanwhile, this fall, cars were being repossessed at the fastest rate since the financial crisis in 2008 and 2009, according to Fitch Ratings. In October, the percentage of subprime borrowers who were at least 60 days late on their car loans had doubled since 2021 to 6.43%, according to the ratings agency.
Economists see that figure as a key indicator of economic stress among low- and middle-income consumers. Since most employees need a car to get to work, they tend to prioritize their car payments over other bills. So, when auto loans fall into delinquency, economists take it as a sign that the average consumer is tapped out.
Upper-income consumers, however, are enjoying salad days, with low tax rates and hefty investment returns giving them enough purchasing power to spur economic growth, Lokar said.
“Unfortunately, we think it’s going to be an upper-income-driven economic expansion because the low- to middle-income folks are under a tremendous amount of pressure right now,” he said. “When we look at how much they have to spend on food, shelter, utilities, transportation and other essentials, that percentage of their budget has never been higher, so they have less discretionary income.
“From a socioeconomic standpoint, that’s not a good thing. Despite that, wealthy folks are in a better position than they’ve ever been, so when we close the hood and ignore that striation, we see an aggregate retail picture that is healthy and improving, and it’s really being driven by the top. We think that’s enough to drive the economy higher in 2026.”
Inflation Just Won’t Go Away
Inflation remains a significant concern after rising to 3% in September 2025, the highest figure since January 2025 and well above the Federal Reserve’s target of 2%. Still, the weakening labor market led the Fed to cut interest rates twice this fall, lowering borrowing costs and making it easier for businesses to invest in new material handling equipment. If inflation trends upward, however, further rate cuts are unlikely in the short term.
“We think the Fed might cut rates one or two more times,” Lokar said. “Our concern is that inflation is going to tick higher in 2026, so the Fed would be struggling to justify a whole bunch of rate cuts. But we don’t think that interest rates need to be at rock bottom for the economy to grow.”
Lokar said the uncertainty surrounding tariffs, which function as a tax on imports, likely is having as large an impact on the economy as the tariffs themselves. A resolution to trade negotiations would provide much needed clarity. ITR Economics is a proponent of free trade, Lokar said, so it doesn’t view tariffs as beneficial to the economy.
With tariffs in place, U.S. manufacturers of material handling equipment can expect higher prices for raw materials, energy and freight, so they will likely pass those costs onto consumers. In addition, as tariffs drive up prices for foreign made material handling equipment, U.S. manufacturers are likely to “take price,” seizing the opportunity to increase their margins, Lokar said. That would be bad news for end users but good news for U.S. manufacturers.
“Domestic manufacturers may be able to increase their prices to just below whatever the imported price point is, even if they’re not being directly affected by tariffs,” Lokar said. “We do see that as inflationary, obviously, and generally speaking, you’re going to see less demand for anything when prices go up.
“The chaotic and haphazard way in which tariffs have been implemented in 2025 created an environment where businesses felt unease with spending money to purchase equipment and invest in systems. The safest thing to do was to do nothing because the headlines are scary.”
Looking ahead, Lokar said dealers of material handling equipment should focus on the fundamentals of their business, seeking ways to streamline operations and control costs to remain competitive. If they do that, they should be able to weather the protracted economic uncertainty and end 2026 on a positive note, he said.
“Just try to tune out the headlines and the noise and concentrate on running your business,” Lokar said. “We’re expecting moderate, garden variety growth in 2026, which we think will be welcomed by the industry after a couple of tough years. But I think businesses will still have to work for it. It’s not like you’re going to roll out of bed and your business is going to grow 10% next year. You’re still going to have to fight for it.”
Article Takeaways
1. Expect Numbers to Climb. – U.S. material handling equipment sales are expected to rebound in 2026, driven by both volume and pricing.
2. Circumstances Will Vary. – Upper-income consumers will likely drive economic growth, while low-and middle-income households will continue to face financial pressure.
3. Focus on Your Plan. – Dealers should focus on fundamentals, streamlining operations and controlling costs to navigate ongoing uncertainty.
