As the nation’s nonresidential construction industry awaits an upturn in activity, economists are keeping a close eye on the purchase rate of construction machinery. This indicator accelerates in advance of rising construction starts and is a positive sign for American manufacturers.
Last year was not good for U.S. construction machinery firms—a reflection of overall industry weakness domestically and abroad. U.S. construction equipment exports declined more than 38 percent in 2009 compared to 2008. According to the Association of Equipment Manufacturers, a total of $12.8 billion worth of machinery was shipped to other nations last year, compared to $17.6 billion in 2008.
However, this data masks some of the improvements that took place throughout the course of 2009. For example, during last year’s final quarter, equipment exports rose 26 percent compared to the third quarter, indicating that construction in certain parts of the world—most notably in China and India—has been recovering for quite some time. In 2009, construction equipment exports to China rose 15 percent, and those to India rose 55 percent. Still, total construction equipment exports to Asia declined 35 percent last year.
| Top Buyers of | U.S. Construction | Machinery |
Country
| Amount (Millions)
|
% Change from 2008
|
| Canada | 3,700 | -41 |
| Mexico | 1,000 | -28 |
| Australia | 922 | -47 |
| Chile | 763 | -16 |
| Brazil | 513 | -29 |
| China | 487 | 15 |
| Colombia | 392 | -17 |
| Belgium | 360 | -48 |
| South Africa | 353 | -49 |
| Peru | 319 | -20 |
| Saudi Arabia | 238 | -44 |
| Singapore | 214 | -48 |
| Russia | 209 | -58 |
| India | 181 | 55 |
| Venezuela | 165 | -57 |
Construction equipment exports to virtually every non-Asian country were down massively, including Russia (–58 percent), Venezuela (–57 percent), South Africa (–49 percent), Saudi Arabia (–44 percent), Canada (–41 percent) and Brazil (–29 percent). Not surprisingly, nonresidential construction has yet to rebound significantly in most if not all of these markets.
Data and predictions for 2010 are more upbeat. After reporting sales and revenues of $32.4 billion for all of 2009—a 37 percent decrease compared to $51.3 billion in 2008—
Caterpillar anticipates a rebound in 2010 as the economy improves and dealers replace inventory. Sales are expected to rise 10 percent to 25 percent this year, with much of the growth attributable to the Chinese and Indian economies. Growth is expected to be less impressive in the United States, and even less so in Europe, but signs of recovery are becoming more apparent.
According to
Reed Construction Data, construction equipment shipments from U.S. factories declined slightly in February on a monthly basis, but are still nearly 20 percent higher than six months ago. However, growth in exports is responsible for almost the entirety of this improvement, which suggests that domestic demand for construction equipment remains sluggish.
Domestic construction equipment purchases are expected to improve later this year. About six out of 10 (62 percent) contractors that responded to the Q1-2010 Wells Fargo Construction Industry Survey intend to purchase new construction equipment this year. Roughly the same proportion intends to purchase used construction equipment this year. In the same survey, 37 percent of equipment distributors believe their sales will climb this year compared to last year. Only 17 percent believe sales will decline, while the balance predicts sales essentially will remain the same.
The results are even more revealing for distributors of used equipment. Fifty-two percent predict that sales of used construction equipment will rise in 2010 versus last year, while only 11 percent foresee a decline. In other words, improvement for the domestic construction equipment industry is on the way, foreshadowing broader improvement in the U.S. economy and the beleaguered construction sector.
Keep in mind, however, that predictions of an upturn in the construction equipment industry likely are based on the notion that the current economic recovery will be sustained into and through 2011—a theory that remains in question.