Economic fortune-teller: interview with Jason Schenker
Where's the global economy headed? Which economic indicators should you be watching? What's the outlook for blockchain? Economic guru Jason Schenker has the answers.
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.
As the president of Prestige Economics, an Austin, Texas-based financial market research and consulting firm, Jason Schenker acts as a sort of professional fortune-teller. By digging deep into government reports, federal statistics, and policy papers, Schenker charts the numbers that drive our stock prices, trading trends, interest rates, and economic booms ... or recessions.
Schenker also has a knack for bringing these dull spreadsheets to life, pointing out the specific figures that can move markets and pulling back the curtain on the way it works. His predictions hit their target so often that the firm is consistently ranked as one of the most accurate economic forecasters in the world. He also runs The Futurist Institute, which trains analysts to predict the future based on current trends and view business opportunities, risk management, markets, and the economy from a long-term perspective.
DC Velocity Senior News Editor Ben Ames caught up with Schenker in October at MHI's 2018 Conference and Executive Summit in Orlando, Fla., just after he delivered a keynote address about the economic prospects for the material handling, logistics, and supply chain sectors. The following is an edited version of his remarks; for the full version of the interview, check out the video on our website.
Q: What are some of the main themes that you've been sharing with attendees here at the MHI show?
A: Well, the main theme is that 2018 was a good year, and we see 2019 as a little bit slower. There are rising downside risks from tighter monetary policy and the ongoing trade war between the U.S. and China, and there are even more risks to the downside for 2020.
Q: Sounds like some challenges coming up. Could you tell us a bit more about what's in store for U.S. businesses in particular?
A: I think on the U.S. side, the biggest positive thing this year has been the tailwind from the corporate tax cuts and the ability to expense equipment. These things have been very positive.
But as I noted earlier, there are some dark clouds on the horizon. For one thing, we've seen rising wages. That has put pressure on company profit margins and raised the risk of overall inflation, leading the Fed to raise interest rates. That poses a downside risk for housing and autos, which in turn creates a risk of a slowing or even a modest contraction in business investment in the next couple of years.
Q: How does that affect the outlook for the supply chain, logistics, and material handling sectors in both the short and long term?
A: In addition to the headline, which is the downside risk from the monetary policy and the trade wars, there is also the trend line, which includes things like the growth of e-commerce and decline of brick and mortar stores .... That is going to be very important for logistics, supply chain, warehousing, and material handling as you continue to shorten the supply chain and cut out the storefront.
That has been going on for a number of years, but now we're really seeing e-commerce's share of retail sales rising. And that share is going to continue to grow. So I think that is a long-term opportunity, even in a downturn, while some of the more industrially exposed parts of material handling could face downside risks. But those that are tied to the almost-evergreen-like future of e-commerce could continue to see their business expand even if things slow a little bit in the overall economy.
Q: What are some of the key metrics you track in developing your forecasts?
A: The most important things, really, for the overall economy are the purchasing manager indexes (PMIs). In the U.S., it is the ISM's (Institute for Supply Management) PMI. In Europe, it is the IHS Markit Eurozone Manufacturing PMI, and in China, it is the Caixin Manufacturing PMI, which is a privately compiled survey of purchasing managers at small and medium-sized manufacturing companies. So those are the main data points I watch to track the global macro economy.
For the forecast we make for material handling, we watch a number of different things: the unemployment rate; the ISM, of course; the nonmanufacturing index; and the 30-year Treasury rate. We watch what's going on with the dollar, the stock market, and industrial production, among other factors.
Q: In your keynote, you mentioned that some of the PMIs are compiled from information provided by purchasing managers for manufacturing companies on the amount of raw material they need to fill orders they've booked.
A: That is right. So this is really interesting. The reason that the PMIs are important are these surveys. If you are in manufacturing, you're purchasing more this month than last month. Why are you buying more? Well, you're buying more because you have orders to fill. When your orders get filled, those finished goods become part of the GDP [gross domestic product], and this is why the [rising] purchasing indexes are a good indicator of economic growth.
[An index rating of] 50 is a break-even point, generally speaking. The Chinese number has recently fallen to 50, which means that in September 2018, manufacturing in China was at a standstill. So production has really slowed in recent months. While that is a low risk to the downside, it does present additional downside risk to commodity prices, oil prices, and things like that.
If we look at the U.S. and the eurozone, those indexes are well above 50. That is very good. Although the eurozone index slowed in recent months, the U.S. ISM PMI remains very strong. So these numbers are really important to watch because they provide a leading indicator of what's going to happen next.
As for the material handling equipment sector, Prestige Economics, my firm, produces the MHI Business Activity Index, the MHI BAI, and that is really important for getting an idea, month over month, of what's going on within the industry. We have seen some choppy moves in shipments and orders going into the second half of 2018. That's a little bit disconcerting going into 2019 because the survey cohort includes respondents from both the more recession-proof e-commerce automation side and the more industrial parts of the business.
Q: When it comes to forecasting, there is nothing like a little hype to stir things up and throw the projections off. Here, blockchain comes to mind. As a matter of fact, you have a book out called The Promise of Blockchain. Could you share some of the book's main points with us?
A: Sure. The full title is The Promise of Blockchain: Hope and Hype for an Emerging Disruptive Technology. So it is about the hope and the hype. The hype is really tied to what happened with bitcoin and other cryptocurrencies—the ability to move this money backed by nothing, supported by no one. It became a very big bubble that had implications beyond financial markets. There were nefarious bad actors and third parties using the money to do different illegal things, politically subversive things, and this is a really big problem. Regulators started clamping down at the end of last year and through this year, and that is likely to continue. So cryptos that want to work outside of the banking system, outside of regulation, are likely to wither on the vine and come under further pressure, whereas those that work within the SWIFT (Society for Worldwide Interbank Financial Telecommunications) banking system [a secure network used by financial institutions to exchange information about transactions] will have more potential to continue. But the hype bubble has very likely burst.
Now, in stark contrast to the bubble of the anonymous, subversive, and mobster-ish use of some of the cryptocurrencies, there is also the hope for blockchain. And that's as a factor for reducing the risk of a "central point of failure," something that in a supply chain is critical. It's also something that can add transparency of transactions, which is really, really good.
The Futurist Institute recently did an analysis that looked at different industries and their use cases. Freight transportation and logistics stood out as one of the areas that could most benefit from the use of blockchain because it involves high-volume transactions, you can have a closed blockchain [one that's restricted to parties that have been invited], and you can share more detail. That is really important because sometimes in the supply chain, you've got conflict minerals or chemicals restrictions or you might need to show the chain of custody. These are really important things to do... and that is the promise of it. That is the hope, against the hype that we see on the crypto side.
To put it in more simplistic terms, what this means is it's a more detailed kind of accounting software. It is database technology. It's actually not that exciting, right? In general, this is like, you know, when Lotus 123 was first introduced—that was a huge deal for folks in accounting. This is like SAP [a much more sophisticated type of enterprise software]—this level of data enhancing the richness, enhancing the transparency. That is all very good, but the hype makes it seem like a lot more than that, and I think we are moving now from a hype phase into implementation. I think what we will find is that the implementation, although useful in some cases, is not as crazy or as interesting as the hype has led some to believe.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.