Labour will continue to be a significant cost pressure in the materials handling sector over the next few years, according to US industry group MHEDA’s Q3 2026 Economic Advisory Report.

The report, prepared by ITR Economics, adds wages and salaries are virtually flat with year-ago levels and are relatively declining as pay increases fail to keep pace with accelerating inflation - “stemming in part from energy shocks due to war in Iran”.

The report also reveals US material handling equipment new orders fell year-on-year in the 12 months to April, and has entered the recovery phase, which is expected to drop into slowing growth in 2027 before moving back into recovery in 2028.

MHEDA and ITR Economics revised down its economic forecast for the remainder of 2026 as the US faces interest rate headwinds, tariff concerns and weak freight trends.

“Some of the expected rise in new orders will be driven by price increases,” the report states. “Input costs like steel, as well as downstream products from oil and petroleum, remain high, so margin pressure is likely to be a threat to profitability in the coming quarters. 

“Higher costs may also cut into demand, limiting volume growth…While the consumer remains relatively stable, if pain points continue to compound, it could pose a risk to e-commerce and material handling in the longer term.”

The report adds that the current economy is not a one-size-fits-all with mild aggregate growth masking uneven outcomes across consumer, industrial and construction markets.

“These divergent outcomes are due in part to different sensitivities to sticky long-term interest rates, inflationary pressures, and uncertainty.”

It states the biggest winners are high-tech and defence.

“Capex spending is accelerating due to both higher prices and increasing spending…We are forecasting top-line rise ahead for the economy, but with heightened risk of stagnant or even declining volumes in 2027 and early 2028,” the report continues.

“Businesses should track unit activity closely instead of relying on revenue trend. Avoid building inventories too aggressively late this year ahead of the softer demand environment in 2027.”

It adds that passive management of a business could place it at risk.

“To future-proof your business, look for ways to tap into the higher growth segments in the near-term to bolster your balance sheet,” the report continues.

MHEDA’s Q3 2026 Economic Advisory Report is available for members from its website.