Construction machinery manufacturers are predicting smaller gains in overall industry business in 2007, following expected double-digit growth in 2006, according to the annual Association of Equipment Manufacturers outlook survey. Survey respondents do expect growth in the United States and Canada, but at a slower pace than the past two years, with strongest 2007 gains predicted for global markets.

Machinery manufacturers expect overall construction equipment business in the United States to close out 2006 with increases of 11.2 percent compared to 2005, with Canada’s business volume growing at a 12.7 clip. Sales to other worldwide markets are expected to grow 10.9 percent.

Survey participants forecast a 3.9 percent growth rate for manufacturers in 2007, with a 5.0 percent boost in Canada. Respondents anticipate a 6.4 percent boost in other worldwide markets in 2007.

AEM member companies build machines for construction and repair of roads, bridges, dams, houses, offices, schools and other public and private infrastructure.

“Although the U.S. economy is starting to show signs of slowing down, it has displayed surprising resilience,” said Gary Shaheen, 2006 AEM chairman and a group president of Caterpillar, Peoria, Ill. “For construction equipment manufacturing, the U.S. housing market has leveled off, but this has been offset by strength in non-residential construction, road building and sales to global markets. We are cautiously optimistic that construction machinery sales will continue to grow through 2007, although at a more moderate pace than 2006. To put this in perspective, 2004 and 2005 sales were among the highest in recent years for the U.S. construction machinery manufacturing industry.”

Shaheen noted that significant investments in the modernization of equipment fleets by major rental companies have made a positive contribution to manufacturers’ growth.

The AEM survey asks respondents to rank the influence of several factors and respondents listed the state of the general economy, including interest rate levels and consumer confidence as top factors, also mentioning housing starts, highway funding, steel prices and energy costs.

“The strong U.S. economy, coupled with the strength of the global economy, has kept construction machinery sales on the upswing over the past few years,” Shaheen said. “There was pent-up demand for equipment, since many customers had delayed purchases through the earlier business slowdown. The strength of the U.S. housing market has certainly been a major factor in the continued business growth of our industry. Higher interest rates have adversely affected this segment with a softening of residential construction.”

Shaheen added that the certainty of highway funding because of the passage of the SAFETEA-LU legislation in 2005 has helped business, but that the high price of inputs and material shortages are concerns for the industry.

Lifting equipment has been the industry’s highest-growth segment, with a predicted 32 percent growth for the U.S. in 2006 and 28.5 percent for Canada and 13.8 percent for other worldwide markets. Sales are expected to grow 10.4 percent in the U.S and Canada in 2007, and 12.3 percent in other global markets.

Attachments and components is another strong area, with 12.1 percent and 12.2 percent growth expected for 2006 in the U.S. and Canada respectively, and 13.5 percent for the rest of the world. Shipments in 2007 are expected to grow 8.4 percent in the U.S., 7.7 percent in Canada, and 10.3 percent in the rest of the world.

Light equipment will increase 8.9 percent in the U.S., 10 percent in Canada and 9.2 percent for the rest of the world in 2006, respondents say, dropping in 2007 to 3.5 percent and 4.8 percent for the U.S. and Canada respectively and 5.5 percent for the rest of the world.

The complete report is available at http://www.aem.org/.