Construction machinery manufacturers predict smaller gains in overall industry business in 2007, following expected double-digit growth in 2006, according to the annual “outlook” forecast conducted by the Association of Equipment Manufacturers (AEM). Growth is expected for U.S., Canadian and worldwide markets, with the strongest 2007 gains anticipated in global markets.
Machinery manufacturers participating in the annual AEM outlook survey expect overall construction equipment business in the United States to close out 2006 with increases of 11.2 percent compared to the previous year, and that business volume to Canada will gain 12.7 percent by year-end 2006. Sales to other worldwide markets for 2006 are anticipated to grow 10.9 percent.
Looking to 2007, survey participants forecast increases of 3.9 percent for the United States and expect business volume to Canada to increase 5 percent. They anticipate growth of 6.4 percent in other worldwide markets in 2007.
Each year, the AEM North-American based international trade group polls its construction equipment manufacturer members on expected industry-wide performance of this multi-billion-dollar industry. Member companies’ machines and equipment build and repair America’s and the world’s roads, bridges, dams, houses, offices, schools and other public and private infrastructure.
“Although the U.S. economy is starting to show signs of slowing down, it has displayed surprising resilience. For construction equipment manufacturing, the U.S. housing market has leveled off, but this has been offset by strength in non-residential construction, road building and sales to global markets. We are cautiously optimistic that construction machinery sales will continue to grow through 2007, although at a more moderate pace than 2006. To put this in perspective — 2004 and 2005 sales were among the highest in recent years for the U.S. construction machinery manufacturing industry,” stated Gerry Shaheen, 2006 AEM chairman and a group president of Caterpillar Inc., Peoria, Ill.
Factors Affecting Future Business Volume
The AEM outlook survey asked respondents to rank the influence of several factors on future construction equipment sales. The state of the general economy, including interest rate levels and consumer confidence, are top factors. Housing starts and highway finding also will have a major impact on the continued strength of the industry, according to AEM survey respondents. Other key issues are steel prices and energy costs.
“The strong U.S. economy — coupled with the strength of the global economy — has kept construction machinery sales on the upswing over the past few years. There was pent up demand for equipment, since many customers had delayed purchases through the earlier business slowdown,” noted Shaheen.
“The strength of the U.S. housing market has certainly been a major factor in the continued business growth of our industry. Higher interest rates have adversely affected this segment with a softening of residential construction.
“The construction and repair of highways, bridges and other public works is also a major contributor to overall construction activity, which makes it of primary importance to many construction equipment manufacturers. The certainty of highway funding for the next few years through passage of SAFETEA-LU legislation in 2005 has been a boon for business,” he remarked.
“The high price of inputs and material shortages costs are serious concerns for our industry and adversely affect equipment manufacturers’ ability to meet production needs in a timely and cost-effective manner,” added Shaheen.
Rental Markets, Export Demand
Rental markets account for a substantial share of equipment sales, and AEM outlook survey respondents cited rental company situations as a significant factor affecting future business. The construction equipment industry is traditionally export-intensive, and survey respondents also noted the strength of the U.S. dollar and export demand as factors.
“Exports of construction equipment have increased as overall business has expanded. The demand from emerging markets such as China, with its boom in infrastructure building, has particularly fueled equipment purchases,” noted Shaheen.
“The major rental companies have made significant investments in modernizing their equipment fleets during the last several years, and this has been very positive for our industry,” he added.
Industry Forecasts by Major Product Lines
The AEM annual outlook forecast covers 71 whole machine product types and 24 types of attachments and compartments, grouped into seven general categories. The survey is conducted in the third quarter of the year and summarizes manufacturers’ estimates of year-end business volume for the current and next year. All percentages reported represent change in unit sales.
For year-end 2006, earthmoving equipment sales are anticipated to increase 3.9 percent in the United States and 5.7 percent for Canada. Other worldwide markets for earthmoving equipment are predicted to gain 11.6 percent in 2006.
For 2007, earthmoving equipment sales are expected to decline 0.3 percent for the United States, while increasing 0.7 percent for Canada and 2.7 percent for other export markets.
The earthmoving segment includes excavators, loaders, haulers, motorgraders, crawler tractors, scrapers, wheeled log skidders, trenching machines and directional drills.
Sales of lifting equipment by year-end 2006 are predicted to gain 32 percent for the United States and 28.5 percent for Canada, while increasing 13.8 percent for other worldwide markets, according to the AEM annual outlook report.
For 2007, sales are expected to increase 10.4 percent in the United States, anticipated to grow 10.4 percent for Canada and predicted to gain 12.3 percent for other worldwide markets.
Lifting equipment includes cranes, aerial lifts, boom trucks, telescopic handlers and rough-terrain forklifts.
Year-end 2006 business in the light equipment market is expected to increase 8.9 percent for the United States, 10 percent for Canada and 9.2 percent for other worldwide markets.
Light equipment business for 2007 is predicted to gain 3.5 percent for the United States, 4.8 percent for Canada and 5.5 percent for other worldwide markets.
The light equipment market includes machines such as breakers, saws, light towers, generators, pumps, compressors and compactors.
Year-end 2006 business for bituminous equipment is expected to increase 9.3 percent for the United States and show and 18.4 percent increase for Canada, while increasing 11.1 percent in other worldwide markets.
Business volume in 2007 is anticipated to grow across all markets, with a 1.9 percent increase in the United States, growth of 5 percent for Canada and a 6 percent increase in other worldwide markets.
Bituminous equipment includes asphalt plants and pavers, cold planers, rollers, road wideners and soil stabilizers.
Sales of concrete and aggregate equipment are anticipated to increase 8.8 percent in the United States by year-end 2006, and show gains of 7 percent for Canada and 10 percent for other worldwide markets.
Market predictions for 2007 are growth of 4.7 percent in the United States, gains of 6.8 percent for Canada and increases of 7.5 percent in other worldwide markets.
Machines in this category include crushers, screens, feeders, conveyors, washing equipment, rock drills, concrete batch plants and pavers.
The business volume for attachments and components is predicted to show year-end 2006 gains of 12.1 percent in the United States, 12.2 percent for Canada and 13.5 percent for other worldwide markets.
Shipments in 2007 are expected to grow by 8.4 percent in the United States, 7.7 percent for Canada and 10.3 percent for other worldwide markets.
This product category includes buckets, quick couplers, augers, demolition shears, pulverizers/crushers, electronic and hydraulic components, powertrains, tires/wheels and engines.
Sales of miscellaneous equipment for year-end 2006 are anticipated to increase 11.7 percent for the United States, 10.5 percent in Canada and 6.5 percent in other worldwide markets.
For 2007, U.S. sales are expected to rise 3.6 percent, sales in Canada are predicted to increase 4.4 percent, and other worldwide sales are forecast to rise 4.5 percent.
Equipment in this category includes light to heavy-duty trucks, trailers, earth drills, landfill/refuse compactors, brush chippers, mobile concrete breakers and trenchless equipment.
For more information, visit www.aem.org.