Following banner year in 2005, expert expects robust 2006
Strength in the general economy will carry forward to the manufacturing and warehousing sectors as well as materials handling equipment sales.
Following a strong 2005, the U.S. economy is promising another
solid performance in the new year. Not only will the general economy
be robust in 2006, but so will both the warehousing and manufacturing
sectors. In turn, they will keep sales of materials handling equipment
and related information systems at high levels as well.
The U.S. Gross Domestic Product (GDP) moved ahead 4.1% in the
third quarter in 2005. In fact, that number would have been 4.5%
had it not been for a number of hurricanes having ravaged the
southeastern United States, according to Jim Haughey, an economist
for Reed Business Information, parent company of Modern. He expects
that when the final numbers are in, GDP in 2005 will advance 3.6%.
Overall, Haughey says he expects an average of roughly 4% growth
in GDP in 2006. "Historically, this is very strong growth,"
he adds.
Manufacturing mirrored the economy's surge in 2005. "Manufacturing
started strong in 2005, slowed a bit, and finished strong to end
the year," Haughey says.
Following a 4% manufacturing expansion in 2005, Haughey expects
similar growth in 2006. With manufacturers operating at 80% of
capacity, these operations are poised to add to their capacities
in 2006, he says.
Auto manufacturers are not faring as well as most other manufacturing
sectors, he adds. Due in part to imports taking primary market
share, coupled with a lower demand, automobile suppliers are feeling
the crunch. The same goes for parts manufacturers in middle America,
as some of those operations are being outsourced abroad, Haughey
says.
The warehousing/distribution sector is experiencing record low
inventories, coupled with ever-climbing throughput. While Haughey
does not expect a major change in this environment, he does expect
the segment will grow faster than manufacturing as imported goods
continue to flow through the supply chain in 2006 and beyond.
Warehousing will continue to see a surge in goods throughput
in 2006, following a 2005 that saw a 4.8% increase over 2004 numbers,
he says. Despite the increased volume of goods moving through
U.S. warehouses, Haughey says that square footage in the sector
remains relatively flat as companies use software and advanced
materials handling practices to keep inventory levels low.
Materials handling equipment sales posted their largest sales
year ever in 2005, ringing in a huge 27% increase over 2004, which
was 12% higher than in 2003. And while the rate of increase will
plateau in 2006, that's still good news for equipment suppliers.
They can expect a flat year in terms of growth, but continued
strength from a dollar perspective.
Orders and shipments of materials handling equipment skyrocketed
30% and 31%, respectively, in September of 2005, compared to the
same period in 2004—according to the Modern Materials Handling
Orders Index.
"The truck market has peaked," Haughey says, "and
although conveyor sales continue to rise, the truck market is
much bigger."
Prices for materials handling equipment are expected to creep
up roughly 1.5%, as opposed to the 5.3% increase in 2005. "Steel
prices continue to slide, helping overall prices slow their upward
movement," he adds.
© 2006, Reed Business Information, a division of Reed Elsevier
Inc. All Rights Reserved.
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