Slowdowns in demand for light construction equipment are likely later this year, according to research released last week by Citigroup and UBS Investment Research.

Weakened dealer six-month purchasing forecasts in the United States, particularly for compact equipment and other housing-sensitive machines will impact the light construction equipment market, the Citigroup survey suggests. The combination of weaker housing demand and manufacturers surprising many dealers with improved deliveries have caused inventories of new equipment to reach their highest level since the third quarter of 2002. Risks to a broader market downturn are interest rate hikes continuing into late 2006, the Citigroup survey says, which might impact on purchasers’ sentiments as they set their initial 2007 equipment needs. Pricing for mid-size equipment could be affected as OEMs target market share in larger machines to offset softness in the compact arena.

Strength in larger machines continued, according to the Citibank survey. North American prospects weakened while European and Latin American dealer outlooks improved.

The UBS report says that a weakening housing market and flat-to-lower rental company capital spending pose risks to light construction equipment demand in 2007.