Optimism about an improving economy and more infrastructure-friendly regulatory policies from Washington lifted U.S. construction equipment sales in 2017, a trend that industry observers expect will continue through next year.
Steve Tam, vice president of ACT Research, calls the estimated overall 6.5% increase in sales “better than the best expectations,” despite the absence of the Trump administration’s promised infrastructure bill. Even so, Tam adds, “money is flowing out there, with a lot of funding activity at the state level.”
But he told investors at a Dec. 4 conference, sponsored by investment bank Credit Suisse, that pricing incentives played a key role in strong order results this year. According to a bank summary, Tam said discounts were offered to large and small fleet owners and that incentives would continue through most, if not all, of 2018.
Frank Manfredi, an equipment market observer, estimates 2017 sales could be up by as much as 12%, with another increase of 5% to 10% next year. “That’s a big change from low point of just a few years ago and will put us close to the 2007 and 2008 levels, when the market was at peak,” he adds.
Still, the U.S. market appears to fall short of its potential, says Chris Sleight of U.K. market consultant Off-Highway Research. Despite forecasting an 8% rise in North American construction-equipment sales this year and next, “increased spending on infrastructure and greater predictability in this area would do much to encourage businesses to invest in new equipment,” he says.
A variety of non-infrastructure sectors also have contributed to the uptick in equipment demand during the year, observers say. Growth in mineral extraction and domestic energy production are among the frequently cited examples, while Tam thinks post-hurricane rebuilding efforts may have had an incremental effect on sales in the Southeast.
Fort Mill, S.C.-based Sunbelt Rentals reported a 17% increase in revenue and an 18% hike in net profit over the previous year for its fiscal half year that ended Oct. 31. The firm’s U.K. parent company, Ashtead Group, attributes that to cleanup efforts from Hurricanes Harvey, Irma and Maria, contending that $40 million to $45 million in revenue relates to storm recovery.
On a Roll
Caterpillar is also among domestic manufacturers benefiting from the year’s current buying spree, recovering from a slow start to the year to book an overall 12% increase in North American construction-equipment sales through November. Overseas sales are also up for the year, led by a 52% boost in the Asia-Pacific region. Sales in Latin America are up 40%.
Investor relations executives told the Credit Suisse conference that mining-sector prospects would improve next year and beyond, “but the speed and timing of the recovery is still debatable,” says the investment bank’s overview. Caterpillar executives also expected continued material cost pressure from higher steel prices into next year and a U.S. construction market “driven by international competition and pricing pressures next year,” said Credit Suisse.
Terex Corp. reports growth in bookings and backlog of aerial work platforms in recent quarters, with the trend set to continue through year end, driven by better utilization and rental rates, President and CEO John Garrison told investors at the Credit Suisse event. According to the bank’s overview, he noted demand emerging in China, where Terex has a manufacturing facility for domestic use and export, and is optimistic about the company’s long-term growth potential.
Brian McGuire, president and CEO of the Associated Equipment Distributors, says many dealers are reporting difficulty in getting orders shipped from manufacturers. But he doesn’t foresee immediate changes in production. “Manufacturers want to see what the climate looks like,” he says. Dennis Slater, president of the Association of Equipment Manufacturers, sees telematics and other equipment productivity features as key factors in customer purchasing decisions.
Manfredi doubts renewed demand will translate to higher prices, noting boosts during the phased rollout of emissions-compliant models. The rental market will provide a sufficient buffer to any product mark-ups that do occur, he says.