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ECONOMIC INDICATORS SUGGEST THAT THE U.S. COULD BE headed for a moderate recession in 2020, as rising interest rates and the impact of tariffs slow the growth of the robust North American economy, a prominent economist told material handling industry professionals in October at the MHI Annual Conference in Orlando, Fla.

Despite that stormy forecast, material handling equipment providers can expect to see relatively smooth sailing, thanks to the “growth tailwinds” provided by federal corporate tax cuts and the continued expansion of e-commerce, Jason Schenker, the president and chief economist at Austin, Texas-based Prestige Economics LLC, said in a keynote address at the show.

Still, the industry faces a rising risk of decelerating growth in 2019 and 2020, as shown by recent federal revisions of 2017 revenue figures on material handling equipment manufacturing (MHEM) data, such as total new orders, shipments, unfilled orders, and domestic demand, he said.

The ultimate impact will likely be nothing like the severe recession of 2009 but rather a pause in growth, as seen in 2001, before the economy regains its footing in 2021, Schenker said. That forecast is based on data gathered through purchasing manager indexes (PMIs) in several countries, which are compiled from information provided by manufacturers about the amount of raw material they need to fill orders they’ve booked.

However, the long-range forecast is also tracking an increasing risk of
recession in China, a variable that could put a serious dent in U.S. economic
performance because China holds such a large percentage of the bonds that
underlie U.S. government debt, he said.

“The bank that finances our debt is China, and we’re in an international trade war with them; that’s not good if we need to borrow more money,” Schenker said. “Inflation is running above target, so Fed rate hikes are coming, housing is already slowing, and there are no longer zero-percent car loans as we saw just a few months ago. If China changes its policy on holding U.S. bonds while U.S. debt continues to rise, that has bad implications.”

—Ben Ames

Economist warns of moderate recession in 2020

Retailers can brace for a busy holiday season this year, as consumers are set to spend an average of 4. 1 percent more than they did during last year’s holiday rush, according to a report released in October by the National Retail Federation (NRF) and Prosper Insights & Analytics.

The more than 7,000 consumers surveyed said they would spend an average $1,007.24, up from the $967.13 they spent last year on gifts, food and decorations, and non-gift/holiday deal purchases. The survey comes on the heels of NRF’s annual holiday spending forecast, which predicts similar gains: Holiday retail sales for November and December are expected to reach between $718 billion and $721 billion, an increase of between 4. 3 percent and 4. 8 percent compared with last year.

A strong economy and low unemployment are driving the trend, the groups said. “Confidence is near an all-time high, unemployment is the lowest we’ve seen in decades, and take-home wages are up. All of that is reflected in consumers’ buying plans,” NRF President and CEO Matthew Shay said in a statement announcing the consumer survey’s findings. Shay added that tariffs on consumer goods from China will have a minimal effect on pricing this holiday season, as retailers imported record volumes of merchandise ahead of the tariffs this summer.