Material handling equipment manufacturing (MHEM) is in for modest growth this year as consumers drive economic expansion, according to the Material Handling Industry’s (MHI’s) latest MHEM forecast, developed by Hal Vandiver, MHI's executive consultant. Nevertheless, both consumers and investors are still wary of pending U.S. fiscal spending and debt resolution.

The MHEM forecast predicts that housing, auto and non-residential construction rebounds will contribute to improved material handling industry growth throughout 2013, into 2014 and beyond.

MHEM new orders grew 7.7% in 2012. The outlook for 2013 is for growth of 6.0% and 10.0% or better for 2014, although some downside risk remains in the first half of 2013.

MHEM shipments grew 9.6% in 2012. Shipments will grow about 7.0% in 2013, and 9.0% in 2014.

MHEM domestic demand grew 10.6% in 2012. Domestic demand (shipments plus imports less exports) will mirror shipment growth in 2013 at 7.0% and just over 9.0% in 2014.

MHEM trade growth slowed by more than 50.0% in 2012, reflecting reduced U.S. demand and serious problems in foreign markets. Import growth in 2012 was 18.7%, down from 37.7% in 2011. Export growth was 12.7% in 2012, down from 26.2% in 2011.

MHEM imports are expected to mirror new order growth in 2013 and 2014, assuming that U.S. production can support domestic demand. Exports are expected to slow by half again in 2013 and hold steady in 2014.

The outlook for 2013 is for growth of 6.0% and 10.0% or better for 2014; although, there remains some downside risk in the first half of 2013. Slow macro growth worldwide continues to hold downside risk for MHEM export prospects.

Overall, Vandiver noted in this report that the recovery has weak momentum and faces headwinds from Washington, but fundamentals, particularly in housing, are improving.

“We expect GDP growth of just 1.0% in both the fourth and first quarters,” he said. “The fourth quarter was held back by corrections in defense spending and inventories, as well as a drag from Hurricane Sandy. The first quarter will be held back by the expiry of the payroll tax cut. We expect a gradual acceleration thereafter.”

And while the fiscal-cliff deal averted most (but not all) of the threatened 2013 tax hikes, it did not address the spending sequester nor the debt ceiling. Vandiver warned that deadlines—and another political crisis—loom for both in two months. However he concluded that unemployment rate will eventually drop.

“We assume that the Federal Reserve will continue quantitative easing into 2014, and will keep the federal funds rate near zero until late 2015, by when we expect the unemployment rate to drop below the Fed's 6.5% threshold,” he said.