Manufacturers Predict Smaller Gains in AEM Business Forecast

According to the annual outlook forecast conducted by the Association of Equipment Manufacturers (AEM), construction machinery manufacturers are predicting smaller gains for in overall industry business in 2007, which follows expected double-digit growth in 2006. Growth is again expected for the U.S., Canadian, and worldwide markets, but the strongest 2007 gains are anticipated to be in the global markets.

AEM's construction equipment manufacturing members participating the annual survey expect the overall construction equipment business in the United States to close out 2006 with increases of 11.2% compared to 2005, and business volume to Canada will gain 12.7% by year-end 2006. Sales to other worldwide markets for 2006 are anticipated to grow 10.9%. Looking to 2007, survey participants forecast increases of 3.9% for the United States and expect business volume to Canada to increase by 5%.

Equipment Sales

Sales of lifting equipment by year-end 2006 are predicted to gain 32% for the United States and 28.5% for Canada, while increasing 13.8% for other worldwide markets, according to the AEM outlook report. For 2007, sales are expected to increase 10.4% in the United States, 10.4% in Canada, and 12.3% in other worldwide markets.

The business volume for attachments and components is predicted to show year-end 2006 gains of 12.1% in the United States, 12.2% in Canada, and 13.5% in other worldwide markets. Shipments in 2007 are expected to grow by 8.4% in the United States, 7.7% in Canada, and 10.3% in other worldwide markets.

Factors Affecting Future Business

The AEM outlook survey asked respondents to rank the influence of several factors on future construction equipments sales. The state of the general economy, including interest rate levels and consumer confidence, was a top factor. Housing starts and highway funding also are predicted to have major impacts on the continued strength of the industry. Other key issues considered were high steel prices and energy costs.

“Although the U.S. economy is starting to show signs of slowing down, it has displayed surprising resilience,” Gerry Shaheen, 2006 AEM chairman and a group president of Caterpillar, Inc., Peoria, Ill. “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.”

With rental markets accounting for a substantial share of equipment sales, the AEM outlook survey respondents also 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.

“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,” Shaheen said.