It is almost a truism of logistics that forklift demand is an accurate bellwether for any economy in that it is usually the first into a recession and the last to emerge but is that truism about to be confounded? According to forklift finance provider, Investec, their latest survey of dealers showed many reasons for optimism and that the forklift sector had developed a strong base for future growth. Over 54% of the dealers interviewed expected business sales volumes to rise 15% or more over the next 12 months, while the remainder expected sales growth of between 5-15% and not a single dealer expected to see sales fall this year. The implication is that the sector should continue to outperform the wider economy, following a tolerably good 2014. Dealers clearly expect to continue to benefit from the ongoing recovery in corporate and consumer confidence as companies look to update and expand existing fleets, noted Andrew Woodward, head of materials handling at Investec Asset Finance.
History shows, however, one should not be carried away by forecasts for the materials handling industry, perhaps the most notorious example being a forecast by Frost & Sullivan on the global outlook for MHE back in 1979. In the event, this highly bullish forecast was more bull than bullish, as by the next year the world’s economy fell over a cliff, much of Britain’s handling industry was decimated and the UK forklift sector, in particular, took many years to recover to its 1979 levels.
The lesson is also that one should take a more holistic view of factors that could quickly impact truck demand and that means looking global. For a global take on economic prospects perhaps the best bellwether is shipping, particularly the dry bulk vessels, and the bells from that quarter are not ringing so joyously. As if to emphasise the growing risks, the Chartered Institute of Purchasing and Supply’s latest quarterly risk index, backdated to 1995, shows that the risk of disruption to corporate supply chains is running at an almost record high, helped by a drop in commodity prices and a slowdown in China, which is so devastating the shipping industry, and heightening the risks to the banking sector, where exposure to dubious shipping and shipyard loans runs into many billions of pounds.
What we are seeing in the global supply chain is essentially a financial risk that began with the global financial crisis in 2008. In China, the manufacturing sectors are at serious risk of defaulting on state-backed loans, while in South America collapses in soya bean, copper and oil prices are adversely affecting much of that Continent. In Australia, the collapse in mineral prices has left the country with the highest unemployment for 13 years. Such uncertainty over the global economic outlook has been particularly deleterious to Japan, where lost decades of stagnation and deflation have prompted companies to restrain investment, so much so that the average age of their facilities and equipment is now 15 years, the highest in 30 years. This has serious implications for their ability to compete in world markets.
Being part of the global economy, Britain must factor into its economic forecasts, more now so than ever, the trends developing in its main trading partners’ economies. If the auguries look mixed, as indeed they clearly do, then potential forklift procurers might be wise to rent rather than buy, if buying was their intention, and go for shorter hire periods or have at least get-out clauses in case business conditions turn sharply against them. If now is not a good time to be in shipping, except those with long purses, then being a global logistician must be more taxing than ever, as never, perhaps, have they faced such uncertain times.
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