MHI Solutions - Volume 3, Issue 5 - (Page 69)

ECONOMIC MARKET ANALYSIS 2016 Outlook: Challenges Ahead for U.S. Manufacturing, Material Handling and Growth BY JASON SCHENKER, CFP®, ERP®, CVA®, PRESTIGE ECONOMICS, LLC The Year Ahead The outlook for U.S. economic growth in 2016 and 2017 softened in the second half of 2015, as forward-looking manufacturing and material handling data reflected a significant slowdown in activity. While U.S. manufacturing has weakened, the U.S. service sector has remained solid, which bodes well for growth through at least the middle of 2016. At the same time that the outlook for the U.S. economy has softened in recent months, the outlook for the global economy has remained modestly positive in light of accommodative monetary policy stimulus being implemented in the Eurozone and China. In 2016, we expect improving Eurozone growth as well as some modest improvements in Chinese manufacturing activity. As the global economy improves, we also expect modestly rising commodity prices accompanied by continued foreign exchange rate volatility-especially as the U.S. economy slows and lurches toward a recession later this year or next year. In October 2015, Prestige Economics conducted its quarterly survey of planned business activity, and approximately two dozen of clients respondents reported expectations of a U.S. recession by 2018 (see bar graph). We have provided this data as an outside perspective, since none of these respondents are active in the material handling industry. Although we do not expect the next U.S. recession will be another Great Recession, another recession is coming. wages and a falling unemployment rate nationally. Because of recent improvements in the domestic labor market, and continued increases in core inflation, the Fed is poised to gradually tighten U.S. monetary policy. Nevertheless, the Fed is likely to take a measured approach to removing highly accommodative monetary policy. Furthermore, although interest rates are likely to increase in coming quarters, the Fed has a limited timeframe to do so, as an imminent recession draws near. Global monetary policy and growth expectations In the year ahead, we expect a modest pace of global growth will be engendered by highly accommodative monetary policies that have been implemented by the European Central Bank, the People's Bank of China, the Bank of Japan and a number of other central banks. Moreover, to ensure continued global improvements, we expect most foreign central banks will remain highly accommodative throughout most of 2016. We also believe that expectations of the gradual removal of highly accommodative foreign central bank monetary policies in 2016 and 2017 will gradually begin to affect foreign exchange rates, by supporting foreign currencies against the greenback. This removal of accommodation abroad could coincide with a weakening U.S. economy, further weighing on the greenback in the second half of 2016 and in 2017. At that point in time, the Fed may be considering more accommodative actions, while foreign central banks are likely tightening policies. U.S. growth expectations and the Fed The domestic U.S. labor market is likely to remain solid through the first half of 2016, which is likely to support * MHI SOLUTIONS 69

Table of Contents for the Digital Edition of MHI Solutions - Volume 3, Issue 5

CEO Update
Ensuring Supply Chain Supplier Sustainability and Transparency
Energy Savings in the Supply Chain
The Future is Now
The Internet of Things: Connecting Supply Chains to Sustainability
Sustainable Supply Chains Requires Effective Supply Management Capabilities
The Changing Face of the Supply Chain: Under 35 and on the Rise
Building a Sustainable Supply Chain Workforce
Industry Focus: Apparel
MODEX 2016 Preview
Industry Trends
Economic Market Analysis
“It was the coolest thing I’ve ever seen!”
Safer Handling
Solutions Group Update
Fulfillment Update
Solutions Spotlight
Scholarship Winners: Where Are They Now?
MHI News
Index of Advertisers

MHI Solutions - Volume 3, Issue 5