The construction equipment manufacturing industry expects overall U.S. and Canadian business to remain flat through the end of 2007 but rebound in 2008, while sales to worldwide markets should continue strong through 2007 and into the next year, according to the annual forecast of the Association of Equipment Manufacturers (AEM).
AEM is the North-American based international trade group representing the off-road equipment manufacturing industry. Each year it surveys its construction equipment manufacturer members about expected sales of the machines that build, repair and maintain America’s and the world’s roads, bridges, dams, houses, offices, schools and other public and private infrastructure.
In the latest AEM outlook survey, overall construction equipment demand by year-end 2007 is predicted to decline 1.9 percent in the United States and remain flat in Canada at minus 0.1 percent, while worldwide business is anticipated to increase 9.9 percent.
In 2008, growth is expected in the United States, Canada and worldwide, with the biggest gains in global markets — an increase of 2.8 percent for the United States and 2.9 percent for Canada, and growth in worldwide markets of 8.0 percent.
Commentary on Outlook
The AEM outlook survey asked respondents to rank the influence of several factors on future construction equipment sales. As expected, the impact of the housing slump was a key factor, as well as the state of the general economy, including interest rates and credit availability. Adequate transportation funding also will have a major impact on the business of many, according to the survey, as will rental company demand.
Construction machinery manufacturing is export intensive, and the strength of the dollar against other currencies also is expected to affect business growth.
Machinery makers also cited commodity shortages and prices, including steel and energy.
“Overall, we’ve seen a slowdown in the past year or so, but it comes after some very good years for the equipment manufacturing industry,” stated AEM President Dennis Slater.
“The residential housing slump in the United States has sent ripples across the entire economy, not only the construction industry. However, growth in non-residential construction continues to offset losses in the housing market. For equipment manufacturers, the continued global demand for construction machinery also is balancing the slowdown in our domestic business. Economic signals are mixed, but there is guarded optimism that our economy will remain resilient and not descend into recession.”
“The public works sector has grown steadily over the past decade and road building is an important contributor. We have guaranteed funding for the next few years under SAFETEALU federal transportation legislation, which will provide some stability for construction equipment manufacturing. However, it is a continuing fight to ensure that the authorized funding is actually released each year. And, a major concern is the estimated multi-billion-dollar shortfall in the Highway Trust Fund.
“Unlike highways, clean water infrastructure work doesn’t even have a trust fund to address the critical maintenance and repair needs in this sector. Looking to the future, we see tremendous business opportunity related to these projects. Clean water is, most importantly, good for the environment and people. But it also is a source of jobs where our equipment is used.
“Rental is a major distribution channel for construction equipment, especially for smaller and medium size machines. Over the past few years, the nature of the rental business has changed. It has not only grown, but that growth has come with major consolidation among companies. There are fewer and larger players, with much more negotiating clout when dealing with manufacturers. And, in recent years, more rental companies are being bought by private equity firms, and their focus on cash flow can affect capital spending.
“Our outlook survey is meant to provide a snapshot look at the industry, and some product areas are experiencing stronger growth than others. Even then, a company’s individual situation may depend on its particular market mix or geographic footprint,” Slater noted.
Industry Forecasts by Major Product Lines
The AEM annual outlook forecast covers 71 whole machine product types and 23 types of attachments and components, grouped into seven general categories. AEM conducts the survey in the third quarter of the year and consolidates manufacturers’ estimates of overall business activity.
Each forecast in the AEM survey is the average of responses from companies in each product line, predicting industry wide expectations rather than individual company performance, and unit sales rather than company profitability.
Year-end 2007 business for bituminous equipment is expected to decrease 8.7 percent for the United States and 8.0 percent for Canada, while increasing 9.6 percent in other worldwide markets. Business volume in 2008 is anticipated to grow across all markets, with a 1.0 percent increase in the United States, growth of 1.8 percent for Canada and a 7.7 percent increase in other worldwide markets.
Bituminous equipment includes asphalt plants and pavers; cold planers; pneumatic, static and vibratory rollers; and soil stabilizers.
Sales of concrete and aggregate equipment are anticipated to increase 4.0 percent in the United States. by year-end 2007, and show gains of 5.7 percent for Canada and 8.7 percent for other worldwide markets. Market predictions for 2008 are growth of 5.2 percent in the United States, gains of 6.2 percent for Canada and increases of 10.1 percent in other worldwide markets.
Machines in this category include crushers; screens; feeders; conveyors; washing equipment; rock drills; concrete batch plants and pavers; concrete truck mixers; and dewatering screens.
For year-end 2007, earthmoving equipment sales are anticipated to decrease 8.9 percent in the United States and 5.1 percent for Canada. Other worldwide markets for earthmoving equipment are predicted to gain 12.4 percent in 2007.
For 2008, earthmoving equipment sales are expected to decline 1.7 percent for the United States and 0.5 percent for Canada. Other worldwide markets are predicted to gain 7.0 percent in 2008.
The earthmoving segment includes crawler and wheeled excavators; rear dump and articulated haulers; backhoe, crawler, wheel, compact and skid steer loaders; motorgraders; crawler tractors; trenchers and ditchers; wheeled log skidders; horizontal directional drills; and scrapers.
Sales of lifting equipment by year-end 2007 are predicted to gain 0.6 percent for the United States and 2.7 percent for Canada, while increasing 15.7 percent for other worldwide markets.
For 2008, sales are expected to increase 5.2 percent in the United States, anticipated to grow 1.3 percent for Canada and predicted to gain 11.9 percent for other worldwide markets.
Lifting equipment includes aerial work platforms; knuckle and telescopic boom truck cranes; all terrain, hydraulic truck and rough terrain cranes; lattice boom cranes; rough terrain and truck-mounted fork lifts; tower cranes; and telescopic handlers.
Year-end 2007 business for light equipment is expected to decrease 1.0 percent for the United States, while increasing 2.5 percent for Canada and 6.3 percent for other worldwide markets.
Light equipment business for 2008 is predicted to gain 3.7 percent for the United States, 4.1 percent for Canada and 5.3 percent for other worldwide markets.
The light equipment market includes machines such as hydraulic and pneumatic breakers; vibratory plate compactors; concrete screeds, saws and vibrators; pumps and trowels; generators; light towers; towable mixers; contractor pumps; power buggies; vibratory walk-behind rollers; air compressors; lasers; core rigs; and truck-mounted air compressors.
Sales of miscellaneous equipment for year-end 2007 are anticipated to decrease 0.3 percent for the United States and 0.8 percent in Canada, while increasing 8.7 percent in other worldwide markets.
For 2008, United States sales are expected to rise 4.6 percent, sales in Canada are predicted to increase 6.9 percent, and other worldwide sales are forecast to rise 5.6 percent.
Equipment in this category includes heavy-duty trucks; earth drills; landfill/refuse compactors; mobile concrete breakers; side dump and flatbed trailers; sewer vacs; environmental grinders; trench shoring equipment; and trenchless equipment.
The business volume for attachments and components is predicted to show year-end 2007 gains of 3.4 percent in the United States, 4.4 percent for Canada and 9.2 percent for other worldwide markets.
Sales in 2008 are expected to grow by 4.9 percent in the United States, 5.6 percent for Canada and 8.9 percent for other worldwide markets.
This category includes buckets; quick couplers; augers; demolition shears; pulverizers/crushers; electronic and hydraulic components; brake systems; saw blades; rippers and scarifiers; truck bodies; compactors; grapples; blades; rakes; forks; trenchers; snow blowers; powertrains; tires/wheels; and engines.
For more information, visit www.aem.org.