Analyst predictions this year for the construction-equipment market show signs of optimism, with some seeing a rise in 2016 equipment sales.
“[Our] forecast is for the start of a gradual return to health in the global construction-equipment market in 2016,” says David Phillips, managing director for U.K.-based Off-Highway Research. The firm is forecasting a 3.9% increase in global construction-equipment sales, with a 4% increase in North America alone. Sales in China, which have dropped in the past two years, are expected to level off.
A positive industry outlook also was evident in Wells Fargo’s 2016 Construction Industry Forecast, which found a generally optimistic attitude in a survey of contractors, equipment dealers, rental firms and manufacturers. Respondents cited expected savings from lower diesel fuel costs and a robust used-equipment market as forces driving expansion in contractor fleets. Wells Fargo analysts did qualify this broad enthusiasm somewhat, noting that the company’s annual Optimism Quotient, while still positive, is lower than it was at the start of 2015.
Analysts with Baird Equity Research are less sanguine. In their “2016 Outlook: Late Cycle Blues” report, the analysts cite a lack of excess building as a major driver of construction in 2016, but they expect “equipment demand to likely remain subdued,” based on reduced investment in the oil-and-gas sector as well as, generally, a slowing investment in infrastructure in emerging markets.
Even the most positive outlook is qualified. “As has been the case since the crisis years of 2008 and 2009, business confidence remains fragile,” says OHR’s Phillips. “The uncertain geopolitical outlook around the world could have a negative impact on the sector.”