Economic Advisory Report: July 2023

This quarterly economic report, published by ITR Economics, features data specifically for the material handling industry to assist MHEDA members plan for the year ahead. The full detailed report is available to members only.

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Ten Key Insights from the Q3 2023 MHEDA/ITR Report: “Where We Are”

1. Downward pressures are intensifying across a wide breadth of markets, and we are seeing more growth rates drop to near or below zero.
2. The single-family residential construction market has been bludgeoned by elevated interest rates, with annual US Single-Unit Housing Starts down 22.4% from one year prior.
3. Adjusted for inflation, annual US Total Retail Sales are virtually flat.
4. The industrial sector is still rising, but the growth is being driven by the oil and gas sector; the manufacturing and utilities segments are declining.
5. Nonresidential construction, which lags other sectors of the economy, is accelerating, but elevated interest rates, tightening credit standards, and a weakening economy will likely discourage new projects.
6. US Consumer Prices inflation has declined from a peak of +9.1% in June 2022 to +3.0% in May, but the Federal Reserve is maintaining a hawkish tone.
7. Meanwhile, the more volatile US Producer Prices inflation has moved from +18.3% to -3.1% over that same time.
8. It will be beneficial to keep more cash on hand, both to shore up your financial position and position yourself to take advantage of deals at the bottom of the cycle, which will occur around late 2024 for most markets.
9. US Material Handling Equipment New Orders in the 12 months through May totaled $46.5 billion, 9.4% higher than the year-ago level. A revision to the historical New Orders data by the US Census Bureau necessitated a new outlook.
10. Inflation has eased significantly; Prices rise is unlikely to contribute substantially to Retail Sales growth in at least the near term. However, we do not expect a return to the low inflation of the 2010s. These trends are likely to impact dollar-denominated Retail Sales.

Takeaways for Your Business:

• Take steps to prepare for upcoming contraction, though the magnitude will vary by industry and geographic region.
• Revisit your capital expenditure plans, though investments to improve efficiencies or reduce labor dependence may still be advisable.
• Have cash on hand to smooth out your finances.
• Keep in mind that lending criteria will likely be stricter as we move along the back side of the business cycle.

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