July construction equipment shipments dropped 2% from June. Although July orders rose 5% to the highest level since last fall, year to date orders are barely more than half of the year to date shipments. Shipments will slip 6-8% lower through next winter. Manufacturers and distributors are still adjusting to the smaller market as evidenced by a still rising inventory sales ratio.

Resumed expansion in construction activity next year will push shipments up 13% from March 2010 to December 2010. This is a sluggish recovery for a very cyclical capital equipment market due to the need to absorb the current large inventory of surplus equipment. When the surplus is largely worked off, construction equipment shipments will jump 22% from the end of 2010 to the end pf 2011.

Small equipment specialized to single family housing construction sites will be the strongest market for the rest of 2010. single family construction spending began expanding late in the spring while spending at nonresidential construction sites began declining at the same time.

US Equipment Market – September 2009

Data Sources: US Department of Commerce and US Department of Labor
Table: Reed Construction Data