In the ever-evolving landscape of equipment manufacturing and construction industries, the year 2023 has unfolded as a period marked by economic challenges and uncertainties. As we navigate through the intricate web of factors shaping these sectors, the following analysis by the Association of Equipment Manufacturers (AEM)  sheds light on the prevailing economic conditions and potential trajectories. Amidst a global environment grappling with the aftermath of the prolonged COVID-19 pandemic, economic indicators paint a cautious picture, signaling a lack of immediate growth prospects for AEM, its members, and the agriculture and construction markets they serve. However, the data, while acknowledging a challenging present, stops short of forecasting significantly darker days ahead. As we delve into the analysis, certain statistics underscore the complexity of the current landscape, with the construction industry experiencing a 3% contraction, construction prices witnessing a 6% decline last year with a projected 3% further drop. Despite these challenges, glimmers of hope emerge from factors such as the Infrastructure, Investment and Jobs Act, fueling growth in infrastructure and energy sectors, and signs of revival in commercial and institutional segments. While near-term concerns persist, the analysis indicates a potential upswing in construction activity in specific sectors in 2024, offering a nuanced perspective on the road ahead. As AEM members report softened demand in recent times, the focus on investments in infrastructure, energy, and utilities hints at a brighter future for the construction industry. Amid these fluctuations, the enduring strength in larger equipment markets offers a beacon of optimism for long-term gains.

When it comes to the short-term economic outlook for equipment manufacturing and the agriculture and construction industries they serve, the only thing anyone can honestly say for certain is there are no certainties.

2023 has been a difficult year for the economy as a whole, and the vast majority of economic indicators suggest growth is not on the horizon for AEM, its members and the ag and construction markets. However, none of the data suggests significantly darker days ahead.

It’s easy to look back at what’s transpired to equipment manufacturers and their customer since the onset of the COVID-19 three-plus years ago with the benefit of hindsight. The pandemic’s impact, along with various other shocks and strains, drove the market to where it is today.

Certain statistics and data points reveal an uneven present and point to an unsettled future, including:

• The construction industry has experienced contraction of about 3% this year.
• Construction prices dropped by more than 6% last year and are projected to see a further decline of about 3% this year.
• The U.S. Fed in October chose to keep interest rates on hold at a 22-year-high, reflecting ongoing concerns about inflation.

While the near-term outlook should serve as a slight cause for concern, there is data that offers some hope for improvement:

• The passage of the Infrastructure, Investment and Jobs Act – and, perhaps more specifically, spending coming from it – is leading to notable growth in both the infrastructure and energy and utilities sectors after significant weakness in recent years.
• Signs of life are being seen in both the commercial and institutional sectors, but that’s coming on the heels of a few very weak years.
• Construction materials prices are coming down, albeit from very high peaks.
• Construction activity overall is set to improve overall in 2024, but mostly in certain areas (industrial, infrastructure and energy, in particular).

While AEM members have reported demand for products across the industries they serve has softened as of late, investments in infrastructure, energy and utilities point to better days ahead for construction over the long term. For ag, however, operational costs for farmers remain a concern, while mixed results related to tractor and combine sales reflect ongoing short-term uncertainties. However, continues sales strength in larger equipment markets offer a glimmer of hope regarding long-term gains.

Source: AEM