In November, the material handling industry, as represented by data from the MHI Business Activity Index (MHI BAI), indicated significant expansions in key areas such as business activity, capacity utilization, new orders, shipments, unfilled orders, and future new orders. However, amidst this positive data, there were two notable weak points: inventories and exports experienced contractions during the same period. Despite these mixed signals, there is optimism in the market stemming from the recent decline in interest rates. Predictions suggest that interest rates may continue to decrease until the end of 2026, a trend that is anticipated to bolster material handling, manufacturing activity, and overall economic growth.
The broader U.S. industrial and manufacturing landscape has shown variances recently. While durable goods orders saw a modest increase in October, the ISM manufacturing index contracted for the eighth consecutive month in November, reflecting ongoing challenges in the sector. This mixed environment was echoed in the MHI BAI data, which improved in its December 3 release regarding November figures. The MHI BAI is informed by leading executives from MHI, the largest association for material handling, logistics, and supply chain in the United States. This data is critical for assessing future economic conditions and identifying trends that could signal overall improvements in economic demand.
In November, the MHI BAI documented widespread expansion, with more categories reporting growth compared to previous reports. A noteworthy aspect was the consistent growth in shipments, marking a trend over the last few years. Even though new orders had displayed weakness over the past two years, November showed a significant uptick, with 65% of respondents reporting monthly expansions in new orders. This growth is especially important as it indicates a potential turnaround in demand, which could positively impact future manufacturing and economic activity. Currently, companies appear to be eliminating backlogs and work-in-progress inventories that had accumulated during the disruptions of the COVID-19 pandemic.
Analyzing the shipment data, nearly 55% of MHI BAI respondents indicated increases in monthly shipments for November. The consistency of these expansions has been notable, with only six contractions in the past 38 months. Conversely, unfilled orders expanded slightly, but the trend indicates that these have only shown growth eight times in the last 29 months. Meanwhile, inventories have consistently contracted, marking the fourteenth consecutive month of decline. The data suggests that companies are managing their backlogs effectively, albeit at the risk of running low on inventories, which could eventually influence future manufacturing capacity.
Moreover, the future outlook based on MHI BAI’s future new orders index is exceptionally optimistic, with a striking 95% of respondents anticipating higher new orders within the next twelve months. Both the three-month and six-month averages for future new orders reflect strong confidence, standing at 95% and 92%, respectively. This robust future outlook is further supported by the anticipated reduction in U.S. interest rates, which should encourage investment and spending within the material handling sector. The expectation of cheaper borrowing costs can significantly influence businesses to reinvest and expand their operations, reflecting an overall positive forecast for the industry.
In summary, the recent data from the material handling industry presents a mixed but largely encouraging picture. While challenges remain in the form of contracting inventories and weak export performance, the overall expansions in business activity, new orders, and shipments suggest a rebound from previous struggles. As the industry grapples with the lingering effects of the pandemic, the newfound strength in incoming orders and shipments, combined with a declining interest rate environment, paints a hopeful scenario for the future of U.S. manufacturing and material handling. The potential for sustained economic growth hinges on these factors, underlining the importance of continuous monitoring and analysis of industry trends.
