Material handling data from the industry group MHI weakened in December compared to November. The December MHI Business Activity Index reflected contractions across most categories, including capacity utilization, shipments, unfilled orders, inventories, and exports. On the upside, there were still expansions in December business activity, new orders, and future new orders. Plus, interest rates have started falling and are likely to fall further through the end of 2026, supporting material handling, manufacturing activity, and economic growth on trend over the next two years.
Material Handling Industry Data Weakened in December
U.S. industrial and manufacturing economic data have been mixed recently. Durable goods orders and industrial production contracted in November, while the ISM manufacturing index contracted in December for a ninth consecutive month. However, the ISM manufacturing index has improved in recent months, approaching the breakeven level of 50 in December.
Recent material handling data have also been mixed, including in the Jan. 6, 2025 release of the December 2024 MHI Business Activity Index by Prestige Economics — known in shorthand as the MHI BAI.
The material handling industry is comprised of manufacturers, technology providers, and other suppliers who provide the hardware and software to move goods through the U.S. and global supply chains. Data in the MHI BAI comes from leading executive members of MHI, which is the largest material handling, logistics, and supply chain association in the United States.
In December, data collected from MHI executives reflected contractions across most categories. There were only monthly expansions in business activity, new orders, and future new orders. Meanwhile, there were contractions in capacity utilization, shipments, unfilled orders, inventories, and exports.
The December MHI BAI showed some weakening from recent reports, including the positive October and November reports.
In making predictions about the future of the U.S. economy, this data should be watched closely. After all, growth dynamics for material handling offer a glimpse into consumption and aggregate economic demand.
Recent MHI BAI reports have shown solid expansions for new orders and future new orders. If those series remain positive, the overall outlook for U.S. manufacturing, material handling, and gross domestic product are also likely to be positive.
Material Handling Shipments Contracted In December
Shipments have been consistently expanding over the past few years in MHI BAI reports. However, MHI BAI shipments were weak and contracted modestly in December, as 52% of respondents reported contractions in shipments and only 48% reported expansions.
Series readings above 50 indicate that a majority of the respondents reported increased monthly activity, while readings below 50 indicate a majority of respondents noted decreased activity.
While shipments were weak in December, new orders were positive and expanded, as 67% of respondents reported monthly expansions in new orders. Despite an expansion in December, new orders have been mixed over the past year, reflecting expansions in 14 of the past 25 months. Meanwhile, shipments have contracted only seven times in the past 39 months.
In stark contrast to shipments, unfilled orders and inventories have been persistently weak, which was also true in December.
Unfilled orders contracted in December, as 52% of respondents reported monthly contractions and only 48% reported expansions. Persistently weak unfilled orders have only expanded eight times in the past 30 months.
Inventories contracted in December, as only 41% of respondents noted monthly expansions, but 59% noted contractions. This was the fifteenth consecutive monthly contraction in inventories, which have expanded just twice in the past 25 months.
Aside from the December 2024 contraction in shipments, the recent trend in the relative strength of shipments compared to the weakness of new orders, unfilled orders, and inventories appears to indicate that companies have been burning off their backlogs and running down work-in-progress inventories over the past two years.
Material Handling Future New Orders Remained Strong
MHI BAI future new orders have been strong and were at 90% in December. This percentage shows that almost all respondents expect future new orders will be higher in 12 months. However, this series slowed in December. As a result, the December three-month average for the future new orders series decelerated to 92%, although the six-month average was unchanged at 92%.
Despite some recent slowing in the future new orders data series and its moving averages, these expansion percentages are all still exceptionally high.
Fortunately, there is even more upside potential for material handling activity in the year ahead. Interest rates have started falling and are likely to fall further through the end of 2026, according to recent Fed member forecasts. A drop in U.S. interest rates and a likely accompanying drop in the dollar are likely to support material handling and manufacturing on trend over the next two years.
With high expectations for future new orders along with expanding current new orders, the outlooks for material handling and supply chain industries are positive, despite some weakening in the December MHI BAI report.
What do you think of recent U.S. manufacturing and material handling data?
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