AEM Forecasts Construction Equipment Growth

October 20, 2004—The construction machinery manufacturing industry is anticipated to close out 2004 with robust business growth, followed by continued but more moderate gains in 2005, according to the just-released annual “outlook” forecast of the Association of Equipment Manufacturers (AEM). Gains are expected to be strongest for U.S. markets, both in 2004 and 2005.

In comparison with other categories of equipment, the lifting segment shows only moderate gains. Machinery in this category includes lattice boom and hydraulic cranes, tower cranes, aerial lifts, boom trucks, rough-terrain forklifts and telescopic handlers. Year-end 2004 sales are predicted to gain 14.7% for the U.S., increase 11.5% for Canada and rise 7.2% for other worldwide markets. In 2005, anticipated gains in this product segment are 8.7% for the U.S., 9.7% for Canada and 5.9% for sales to other worldwide markets.

Machinery makers cited commodity costs, most notably steel prices and availability, as negatively affecting business growth in 2005. “When the U.S. government lifted steel import tariffs late in 2003, industry experts expected prices would stabilize and perhaps fall. But other factors affected the marketplace in 2004,” stated AEM Chairman Charles Stamp, Vice President Public Affairs Worldwide for Deere & Company, Moline, Ill.

“These included world demand from China, a weak U.S. dollar, shortages of scrap steel, rising costs of other raw materials and higher logistics costs,” he added. “In addition, increased oil and gas prices will also affect our cost of doing business.”

Continued federal transportation funding is extremely important for every machinery manufacturer and was a major factor noted in the AEM outlook survey. “Government funding under a new federal highway bill should boost public works spending, even if the authorized spending levels do not fully meet road and bridge repair needs,” Stamp said. “Delays in the passage of transportation legislation has affected the pace and amount of state transportation contract awards. States have not and will not sign significant contracts without assurances of federal funding. Lower state contract execution has negatively impacted machinery sales.”

Additionally, the rental market remains an important segment for construction equipment makers, which consumes nearly half of all construction machinery sold. According to Stamp, “There remains pent-up demand from our customers, who have been replacing aging fleets now that the general economy is growing.”

To see the complete AEM outlook survey, go to www.aem.org.