This past week I attended the National Fluid Power Association's (NFPA) annual Industry & Economic Outlook Conference (IEOC). It is always a great event not only for the market data provided but also the opportunity to see and interact with others in the fluid power industry.
READ MORE: NFPA Industry & Economic Outlook Conference to Provide Vital Market Perspectives
Attendance was strong once again. According to opening remarks from NFPA President and CEO Eric Lanke, around 270 people were registered for the event—while not a record this figure demonstrated a positive turnout especially after the past 2 years of events having to be held virtually or not being as heavily attended due to the global health pandemic.
NFPA Continues Industry Engagement
During his opening remarks, Lanke highlighted some of the recent achievements of the NFPA and the industry which included raising a record $9,400 for the NFPA Foundation during the golf fundraiser held in conjunction with the IEOC. This will enable the association to continue its efforts to provide educational opportunities for students of various ages in the hopes of developing the future fluid power industry workforce.
Lanke also noted initiatives being undertaken within the industry such as bringing back NFPA regional meetings; one will be held November 3 in Cleveland, OH, and another is planned for April 2023. These provide an opportunity for industry members to meet and discuss what is taking place as well as network with one another.
The Fluid Power Industrial Consortium (FPIC) quarterly seminars which aim to help educate the industry on various technologies and trends will continue as well, and for now will remain virtual events. Upcoming 2022 FPIC seminars will be held September 1 and December 1 with 2023 seminars currently slated for March 2 and June 1. The September 1 event will be hosted in conjunction with the Association of Equipment Manufacturers (AEM) and is entitled "Increasing Efficiency and Reducing Emissions with Electric-Powered Hydraulics on Mobile Machines."
As part of its efforts to promote fluid power, Lanke said NFPA plans to expand its trade show programs and events to provide a broader range of education programs at targeted events which demonstrate important applications for hydraulics and pneumatics. IFPE 2023 will of course be a key event for the fluid power industry. Additional shows the association is targeting include:
- Pack Expo
- World Ag Expo
- Offshore Technology Conference (OTC)
- WasteExpo
- Utility Expo
READ MORE: One Year Out, IFPE & CONEXPO-CON/AGG Looks to be Bigger and Better
Slow but Positive Markets Expected
The 2022 IEOC was full of great industry perspectives from economists, research firms and industry. Highlights from the schedule included an overview of U.S. and global markets as well as key market segment insights for the fluid power industry and a look at surviving supply chain challenges. Breakout sessions included looks at specific markets such as construction equipment and managing cybersecurity.
Lanke said during his opening remarks that at the 2021 event, the industry was enjoying a robust economy and just starting to feel the impacts of the supply chain challenges while at this year's event the industry is starting to feel a slow down in growth. The latter was supported by many of the economic presentations given during the IEOC — yes there is a slow down occurring but it does not necessarily mean there is doom and gloom ahead.
Overall, the consensus provided by economists at the event was that the industry should expect slow growth through the end of 2022 and into 2023. Segments the fluid power industry serves, such as manufacturing and mobile equipment, will continue to demand product but not quite at the levels seen in late 2020 and throughout 2021.
This slow down will actually benefit many companies as it will allow them to get caught up after the high levels of demand seen in recent quarters. As one economist put it, we are going from 120 mph to 65 mph — after such elevated growth the slow down is not bad but a somewhat more normal pace that will enable many fluid power manufacturers and their customers to more easily meet order demand.
The slower pace is expected to help supply chains as well due to manufacturers of all types having the opportunity to catch up with their production and supply of goods as the global economy slows. "The big theme is that manufacturers are catching up in the second half of 2022 and [into] 2023," said Connor Lokar of ITR Economics during his presentation at the IEOC.
Lokar and other presenters noted companies will need to be rational about what their demand is and backlogs, and that they should manage appropriately going forward.
Sectors fluid power serves such as construction equipment, automotive, material handling and others will see slower growth as well in the coming quarters but again are expected to remain positive markets for hydraulic and pneumatic component manufacturers, particularly after mid-2023 when markets are expected to pick up again.
As we head into a period of slower growth, it was noted companies should be using now the time to invest in themselves to modernize and increase efficiency. This will aid not only with current labor challenges, which are expected to persist until the 2030s when there is expected to be a larger labor pool once again, but also prepare business for the next uptick in economic activity expected in late 2023 and throughout 2024.
Further inflationary pressures are expected in the second half of the 2020s as well, making it critical to invest in your business now and create a long-term plan, said Alan Beaulieu, President of ITR Economics during the IEOC.
And as for the economy entering a recession...that remains to be seen. None of the presenters provided a clear consensus on this during the IEOC, though Jim Meil of ACT Research offered various scenarios for types of recessions that could be possible. He showed a mild recession is most likely coming for the fourth quarter of 2022 and into 2023, but it will be manageable for most.
However, he noted businesses should be cautious in case it winds up being worse than anticipated. There are still black swan events which could occur and negatively impact the economy.
Overall, things should remain positive for the fluid power and related industries but businesses should make sure they are being flexible to weather any possible storms that could be ahead.
