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AEM Business Forecast

Courtesy of AEM 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.

January 08, 2007

Courtesy of AEM

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 5 percent for Canada. They anticipate growth of 6.4 percent in other worldwide markets in 2007.

"Although the U.S. economy is starting to show signs of slowing down, it has displayed surprising resilience," said Gerry Shaheen, 2006 AEM chairman and a group president of Caterpillar Inc. "For construction equipment manufacturing, the U.S. housing market has leveled off, but this has been offset by strength in nonresidential 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."

The AEM outlook survey asks respondents to rank the influence of several factors on future construction equipment sales. Not surprisingly, the state of the general economy, including interest rate levels and consumer confidence, are top factors. Housing starts and highway funding will also 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," Shaheen said.

"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."

The AEM annual outlook forecast covers 71 whole machine product types and 24 types of attachments and components, 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. Sales of lifting equipment by year-end 2006 are predicted to gain 32 percent and year-end 2006 business in the light equipment market is expected to increase 8.9 percent.

Other U.S. year-end numbers show a 9.3-percent increase in bituminous equipment and an 8.8-percent increase in concrete and aggregate equipment. The business volume for attachments and components is predicted to show year-end 2006 gains of 12.1 percent.

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