Industrial Truck Market Slowing

Expect slight decrease from record-setting 2006.

By James J. Malvaso

Last year in this space, I said 2006 would be among the best years in recent memory. On that point, the current market volumes show that forecast to be on target. I did not feel, at that time, that 2006 would show robust growth. However, all indications are that 2006 is up 7.7 percent from 2005, resulting in end-user orders for the United States and Canada of approximately 209,500 Class I-V forklift trucks, a record year for the North American forklift industry.

As we all recall, the year 2000 was the previous market-size high for the forklift truck industry and the economy as a whole. The proverbial bottom fell out in early 2001, resulting in a 30 percent decline in orders. We began our slow recovery in 2003. Every year since has experienced some market increase, and 2006 continues that trend. This is attributed to economic indicators that are still somewhat positive, especially unemployment numbers, productivity and consumer confidence. The last has fallen off somewhat due to rising interest rates, oil prices and all the related products and housing construction cost due to wood, copper and steel. However, we have not seen this as having a significant negative impact on the demand for material handling vehicles and equipment.

It is interesting to note the comparison between the first and second half forklift truck demands for 2006, which might be an indication of things to come for 2007. Exhibit 1 tracks the Class 1, 2, 3, 4 and 5 End-User Orders for the years 2003 through 2005, as well as my estimate at the end of 2006. We clearly see the consistent pattern of growth. Class 3 leads the expected increase at 12.1 percent, followed by Class 2 at 8.7 percent growth. Since the majority of these trucks are used in warehousing and distribution, the general positive consumer and economic indicators are supportive of this increase. Counterbalanced Classes 1, 4 and 5 will also increase this year but at a lower rate, generally around 5 percent.

The actual number of bookings for the first half of 2006 totaled 109,923 units. If the full year's estimate of 209,500 units is accurate, the second half of 2006 saw unit orders of just 99,575 trucks. This is a 9.4 percent decrease in end-user bookings from half to half, which is somewhat indicative of current economic sentiments. Most of the drop is expected to come in the electric classes of trucks, Classes 1, 2 and 3.

This brings me to the outlook for 2007. The Industrial Truck Association (ITA) surveys its members on a routine basis to get their views on the market outlook. Exhibit 2 shows 2003, 2004 and 2005 actual totals along with the 2006 and 2007 estimates. 2007 is estimated to be approximately 207,612 units, which represents about a 1.7 percent drop in orders. This estimate, however, is a 4.2 percent increase from the second half of 2006's projected run rate. It would also make 2007 the second-strongest market in our history. The estimates show no major mix changes between the classes of trucks. Clearly, a continued strong economy, controlled inflation, growing consumer confidence and no major terrorist or negative world events are critical elements supporting this projection.

Last year, I commented that the economy is not likely to exhibit the unprecedented growth that we experienced throughout the 1990s. Growth would be more steady and realistic, at an annual rate of 3 percent to 5 percent. I still feel strongly that, over the next few years, this is an accurate assessment. All and all, the material handling industry remains one of the most stable industries in North America. With the introduction of technologies such as AC motors and controls, RFID, vision systems, information systems and, one day soon, commercially available fuel cells, we remain an important link in the movement of goods from producers and ports to the consumer. Our outlook is bright as we continue to help make the American economy move upward.

   Current Issue   |   Past Issues   |   Search   |   Contact Us   |   Advertising   |   MHEDA Home Page

The MHEDA Journal • First Quarter 2007 • Volume 36, No. 1 • Contents are Copyright © Data Key Communications, Inc.
All rights reserved. • Nothing may be reproduced in whole or part without written permission of the publisher.