The U.S. economy could enter a modest recession by 2017, but logistics companies can weather the squall and help lead the country out of any doldrums, according to an economic forecast delivered today at the Material Handling Industry (MHI)'s annual conference in Jacksonville.
The broader economy should produce reliable growth during the next one to two years, said Jason Schenker, president and chief economist at Prestige Economics LLC. In addition, U.S. supply chain management companies reported solid results in September, the most recent economic figures available, the company said. MHI has retained the Austin, Texas-based forecasting firm to create a monthly economic model tailored to the logistics and supply chain industry, called the MHI Business Activity Index.
The index shows that logistics firms polled about their business activity in the past month have seen modest expansion, with 52 percent of respondents reporting growth. About 78 percent reported growth in future new orders, 65 percent reported an expansion of shipments, and 52 percent reported a rise in unfilled orders.
However, the report also revealed a few sour notes, such as just 39 percent showing a rise in new orders (a separate category from "future new orders"), and mere 27 percent reporting an increase in exports. At the same time, corporate leaders are seeing increased economic risk on the global stage, with events like Chinese currency devaluation, a strong dollar, and a slowdown in oil and gas revenues causing turmoil and volatility, Schenker said.
"We're looking at a slowdown, but the U.S. economy is not monolithic," said Schenker. "The oil and gas sector is going to face some very difficult times, but the service sector and new housing starts are rocking."
Companies in the supply chain area of the economy could see a "modest pullback" from current conditions, but in the long view, the impact will merely be a slowdown of current growth rates from record-high levels, Schenker said.
By implementing a few prudent fiscal protections, logistics firms should be able to weather the storm, he added.
"You can reduce costs and make your systems run more efficiently," Schenker said. "All eyes will be on you. This is going to be a big and important year for material handling, supply chain, and procurement."
Despite strength of the U.S. economy, events such as financial turmoil in Greece and China can have an outsized impact because of the international nature of the modern economy.
"I encourage you to look at the world as a global supply chain," Schenker said. "The U.S. and Europe buy stuff, China makes stuff, and a whole bunch of other countries supply raw materials and commodities."
Most U.S. businesses will be sheltered from the impact of foreign financial strife because of strong consumer spending and confidence data, low unemployment, and continued spending in the service sector, such as business services, healthcare, travel and hospitality, education, and retail sales jobs.
Together, those variables should mute the impact of global turbulence, reducing the fallout from a potential U.S. recession to levels "nowhere near" the depths of the Great Recession.
"You might not be able to run, you might not be able to hide, but you can have some kind of strategy on how to manage things and you can get through," Schenker said. "You can grab the bull by the horns, and you might get covered in dirt-encrusted bull drool, but that's better than getting carted off on a stretcher."
