US construction equipment manufacturers continue to be in a “maintenance” market as they have been for about a year. Shipment and orders are varying month by month in a very narrow range. They are averaging high enough to avoid discount pricing but not high enough to permit the margins they realized in the 2005-06 equipment boom. Progressively rising exports to a strong world economy, especially for Chinese infrastructure building and for mining, are offsetting softening domestic sales to the slumping US construction market.
There are no clear signs of a changing trend but here are three tentative signals that equipment demand may be slipping slightly. First, orders were below trend in the latest month. This could be random or it could an early sign of slipping demand. Second, the price index for equipment rental rates fell marginally in March which could also be an early sign of slipping demand. Third, used equipment prices are now weakening based on auction results.
Hence, the outlook for the next few months is for somewhat weaker pricing for equipment users. Do not expect a significant cut because both steel prices and the still depreciating $US continue to put upward pressure on equipment prices.
US Equipment Market – February 2008
| Jan 08 Actuals |
Feb 08 Actuals |
Latest Month (December 07) | |||
| Versus Year Ago |
Versus 3 Months Ago |
Versus Previous Month |
|||
| $Millions, seasonally adjusted | $US millions | ||||
| US Equipment Manufacturers | (seasonally adjusted) | ||||
| US Factory Shipments | 2,284 | 2,344 | 22.5 | -0.9 | 2.6 |
| US Factory Orders | 2,605 | 1,939 | 22.7 | -0.8 | -25.6 |
| US Factory Unfilled Orders (month end) | 10,301 | 9,896 | 6.5 | -2.5 | -3.9 |
| US Factory Inventory (month end) | 5,166 | 5,216 | 8.5 | 1.7 | 1.0 |
| US Factory Order Backlog (months) | 4.5 | 4.2 | -13.0 | -1.6 | -6.4 |
| US Equipment Imports | 1,212 | 1,183 | 2.6 | 6.9 | -2.4 |
| US Equipment Exports | 1,323 | 1,491 | 32.4 | 8.7 | 12.8 |
| US Equipment Consumption | 1,986 | 2,105 | 39.9 | -2.9 | -5.6 |
| (shipments- exports + imports +/- inventory change) | |||||
| Construction Equipment Price Index | 181.5 | 182.3 | 2.0 | 0.9 | 0.4 |
| Construction Equipment Rental Price Index | 118.9 | 119.3 | 1.4 | 0.6 | 0.3 |
Data Sources: US Department of Commerce and US Department of Labor
Table: Reed Construction Data
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