AEM - Association of Equipment Manufacturers

09/13/2024 | News release | Distributed by Public on 09/13/2024 11:46

Q3 Ag and Construction Market Outlook: Optimism Wanes As 2024 Winds Down

When it comes to the short-to-medium-term expectations for thefuture of the equipmentmanufacturing industry and the agricultureand constructionmarkets itserves,it seems safe to say opinions are mixed.

While inflation seems to have subsided without major increase in unemployment,there remainconcerns the U.S. economy is still at risk of a recessionif the Federal Reserve does not react to recent data and cutits rate as marketexpects.The numbers aren'tall bad, however. Most notably,global construction growth is expected in 2024. While it will likely bemore subdued this year than in 2023(when the industry saw growthof more than 4%), worldwide output is being bolstered in large part by the health of the Chinese construction marketas well as the robust growth in the U.S. energy, utilities, and infrastructureconstruction sectors.

As for agriculture, there has been asteady decline in optimismamong ag equipment manufacturers,with regardto ag equipment demand as evident in AEM's second-quarter Industry Conditions Survey.The main reason behind this sentiment is the increased possibilitythe U.S. farm economy isheadedtoward another year of weak returns,as supply continues to outpacedemand.Furthermore, recent agequipment sales data for all agequipment categories have all trended downward and are lower year-over-year.

With all that being said, thereare some of the mosttakeaways from AEM's recently held webinar, which featured expert perspectives from AEM Senior Director of Business intelligence Al Melhim and GlobalDataconstruction economistTom Hogood:

Construction

  • U.S. construction market growth is expected in 2024on the heels of about 3%growtha year ago.
  • Five out of six sectors are expected to experience growth in 2024, with residential construction being the only one expected to see a decline.The highest growth areas are projected to beinfrastructure and energy/utilities.
  • Growth in infrastructure will be driven by government policies such as the Inflation ReductionAct (IRA)and Infrastructure Investment and Jobs Act (IIJA).
  • Interest rates are expected to fall, which bodes well for a residential construction market that has struggled due to higher rates in the past and present term.

Agriculture

  • Ag equipment inventory levels are climbing year-over-year and quarter-over-quarter, which is particularly troublesome given currently higher interest rates.
  • Crop conditions are better year-over-yearand remain oncourse for high yield and production, while export demand is lagging for both old crops and new crops.
  • Crop production costs remainelevated, despite drops in fertilizer and fuel expenses.
  • Real net farm income is the lowest it'sbeen since 2021, and it is likely to drop further over the long term.

2023 was an uneven year for both the U.S. and global economies, which negatively impacted AEM members and particularly the ag market. This year isn'tplaying out much better(in spite ofsome positive indicators on the construction side), and challengeswill continue to presentthemselves toAEM members and underlying marketsfor the remainderof 2024 and beyond.

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