The economy in the United States is limping along with predictions for almost no growth, and many are wary of a double-dip recession. The continuing high unemployment rate, the lack of an increase in housing starts, the inability of the House of Representatives, the Senate and the White House to deal effectively with our fiscal integrity, and the impending 2012 national election all are major concerns. We do need to get our houses in order, so to speak, focusing on repairing the economy instead of party politics and re-election.
On the other hand—and thankfully—the naysayers’ predictions are out of step with what we are seeing in the material handling industry. The Industrial Truck Association’s predictions, based on past performance and our best estimates about the future, are positive—in fact, far more so than what we see in general industry and the economy.
The State of Manufacturing
Over the last 32 years, the U.S. Gross Domestic Product (GDP) has grown at an annual rate of at least 2.5% a total of 22 times. In each of those 22 years, the lift truck industry has grown as well. During the 10 years that GDP growth was less than 2.5%, our industry declined in all 10. Thus, GDP growth, or lack thereof, is closely aligned with the lift truck industry…except in 2011.
Over the last 32 years, the U.S. Gross Domestic Product (GDP) has grown at an annual rate of at least 2.5% a total of 22 times. In each of those 22 years, the lift truck industry has grown as well. During the 10 years that GDP growth was less than 2.5%, our industry declined in all 10. Thus, GDP growth, or lack thereof, is closely aligned with the lift truck industry…except in 2011.
Despite the lackluster GDP performance, our industry grew in 2011. Many believe it is due to the strong recovery in manufacturing, which is understandable when considered in the context of the broader economy.
Out of 27 industries (including material handling equipment) tracked by the Manufacturer’s Alliance, 21 were growing in 2011. Compared with 2010, when the material handling industry was in accelerating growth mode, the industry continues to grow, but at a more moderate pace, driven by similar rates of growth in most manufacturing industries. Overall, the recovery in manufacturing is broad-based, with most industries growing and only a few that are not, albeit important ones like housing and construction that continue to decline.
Manufacturing growth rates have been impressive coming out of the recession, but they don’t convey the cyclical position of manufacturing relative to its production peak. For the overall economy, GDP fell 4% during the 2008-2009 recession. By fourth quarter 2010, GDP had recouped most of the output lost in the recession.
The overall economy technically moved from recovery to expansion in the first quarter of 2011. Manufacturing, on the other hand, is only a little over half recovered and remains in the recovery phase. Recently, revised industrial production numbers show that manufacturing production declined 20 percent from the peak in December 2007 to a trough in June 2009. Over the next two years, manufacturing production increased only 14%. The level of manufacturing production in June 2011 was still 9% below the December 2007 cyclical peak. At its current growth rate, manufacturing production will not be fully recovered until mid 2013.
Not only was the 2008-2009 manufacturing recession the worst since the 1930s, but the seemingly strong pace of recovery has not kept pace with the recoveries from other severe recessions.
| The overall economy technically moved from recovery to expansion in the first quarter of 2011. At its current growth rate, manufacturing production will not be fully recovered until mid 2013. |
From the trough in second quarter 2009 to the first quarter of 2011, U.S. manufacturing has grown 12%. Prior to the 2008-09 recession, the 1974-75 and 1981-82 cycles were the two longest and most severe recessions in post-World War II history. In the first seven quarters of recovery following these two severe recession cycles, manufacturing production increased 17 percent.Overall, manufacturing activity is more heavily impacted by the business cycle than GDP. While manufacturing output saw a greater decline in the 2008-09 recession, it is now outperforming the economy at large during the recovery. Manufacturing production growth is expected to continue to outpace GDP growth into the near future.
Now, let’s talk more specifically about lift trucks.
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The State of Industrial Trucks
As we know too well, demand for lift trucks is highly cyclical and, like most capital goods, is tied to general economic activity. Coming out of the recent recession, after three consecutive years of double digit declines, the lift truck industry grew 39% in 2010 and was up 31% as of September 2011.
As we know too well, demand for lift trucks is highly cyclical and, like most capital goods, is tied to general economic activity. Coming out of the recent recession, after three consecutive years of double digit declines, the lift truck industry grew 39% in 2010 and was up 31% as of September 2011.
Four times a year, ITA surveys its board of directors and asks members to estimate what new truck orders will be in the coming quarter and the coming years. ITA members projected 2011 North American order volumes to finish 20% higher than 2010; orders in 2012 are expected to grow further by 11 percent. In the U.S. and Canada alone, truck orders are projected to reach almost 175,000 units.
One of the more profound trends in our industry over the last several years is the shift from internal combustion (IC) to electrics, with electrics going from 56% of the total in 2006 to 63% in 2010. The peak of 67% in 2009 was surely driven in part by economic factors, but the move to electrics clearly has staying power. Orders remain above 60% of the industry, even in the face of a strong, post-recession IC recovery.
Due to heightened concerns with fossil fuels and advances in technology, many think that electrics will never again be less than 60% of the North American market. This prediction is borne out by recent order rates and is reflected in ITA members’ forecasts.
| In the U.S. and Canada alone, truck orders are projected to reach almost 175,000 units. |
In manufacturing industries, IC products still predominate. Because manufacturing activity is more heavily impacted by the business cycle than the overall economy, demand for IC products is more heavily impacted by the business cycle than electrics. The optimist’s take away from this is that IC products have the same growth potential predicted for manufacturing.
Despite growth already enjoyed, more may be around the corner—and this optimism is reflected in our members’ forecasts.
About Continental Lift Truck & Used Forklifts
Continental Lift Truck, located in Minneapolis, MN, is one of the largest wholesalers of Used Forklifts in the World. Established in 1984, the founder of the company, Douglas Tamasi, has been in the forklift industry since 1969.
Our huge inventory includes: Cushion Tire Used Forklifts, Pneumatic Tire Used Forklifts, Rough Terrain Used Forklifts, Three Wheel Electric Used Forklifts, Sit Down Rider Electric Used Forklifts,Reach Trucks Used Forklifts and more used forklifts.
Continental Lift Truck, located in Minneapolis, MN, is one of the largest wholesalers of Used Forklifts in the World. Established in 1984, the founder of the company, Douglas Tamasi, has been in the forklift industry since 1969.
Our huge inventory includes: Cushion Tire Used Forklifts, Pneumatic Tire Used Forklifts, Rough Terrain Used Forklifts, Three Wheel Electric Used Forklifts, Sit Down Rider Electric Used Forklifts,Reach Trucks Used Forklifts and more used forklifts.
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