An insider's look at the driving forces behind what equipment manufacturers in the construction industry will be facing for the remainder of this year.
The equipment manufacturing industry is still recovering from the impacts of the COVID-19 pandemic nearly three years after its onset.
With that fact firmly in mind, the Association of Equipment Manufacturers (AEM) regularly surveys its members regarding their thoughts on various economic trends and how they are affecting their efforts to do business, both within the United States and abroad. In the latest survey, most respondents stated that they are still experiencing supply chain issues, with many saying that conditions continue to worsen.
The ongoing challenges of high interest rates, as well as energy and material prices, have plagued the construction industry, but hope is on the horizon for these issues, as well as others, to eventually be resolved.
Here are some of the driving forces and key points from AEM’s Q1 webinar regarding what equipment manufacturers in the construction industry will be facing for the remainder of this year, according to presenter Danny Richards, lead economist, construction, at Global Data.
Global construction output growth slowed in 2022 and is to remain sluggish in 2023. Interest rates remain high and could rise further in the first half of this year before central banks bring to an end this tightening cycle, assuming of course that inflation starts to fall. Energy and construction material prices also remain high, although some have fallen from the peaks of the second quarter of last year.
Investment in infrastructure, as well as in energy and utilities, will be driving forces for growth. Investment in infrastructure will continue to be a driving force for growth, especially as the Investment Infrastructure and Jobs Act in the U.S. gathers momentum. Energy and utilities will also provide a boost to overall construction activity, with renewable energy projects remaining a key investment focus.
The industry is optimistic as it tracks $3.6 billion in projects across multiple sectors. Despite a relatively weak short-term outlook for construction output, there is still a sizeable pipeline of opportunities on the horizon over the next several years.
The decline in construction output is expected to slow in 2023. The U.S. was one of the few markets to register positive growth in 2020 and 2021. However, driven largely by intense inflationary pressure and a slowing residential sector, output dropped sharply in 2022. Despite the deeper-than-expected decline in the residential market remaining a risk to overall growth, there has been an improvement in non-residential sectors.
The data shows AEM CE indexes are in line with the average indexes. And, despite supply chain and workforce retention issues, many equipment manufacturers are hopeful for eventual resolutions to these ongoing issues plaguing the industry.
Want to know more about what’s on the horizon for equipment manufacturers and the industry they serve? If you’re an AEM member, be sure to attend the upcoming Q2 Equipment Market Outlook Webinar, on May 4.
