When it comes to the short-to-medium-term expectations for the future of the equipment manufacturing industry and the agriculture and construction markets it serves, it seems safe to say opinions are mixed.
While inflation seems to have subsided without major increase in unemployment, there remain concerns the U.S. economy is still at risk of a recession if the Federal Reserve does not react to recent data and cut its rate as market expects. The numbers aren’t all bad, however. Most notably, global construction growth is expected in 2024. While it will likely be more subdued this year than in 2023 (when the industry saw growth of more than 4%), worldwide output is being bolstered in large part by the health of the Chinese construction market as well as the robust growth in the U.S. energy, utilities, and infrastructure construction sectors.
As for agriculture, there has been a steady decline in optimism among ag equipment manufacturers, with regard to ag equipment demand as evident in AEM’s second-quarter Industry Conditions Survey. The main reason behind this sentiment is the increased possibility the U.S. farm economy is headed toward another year of weak returns, as supply continues to outpace demand. Furthermore, recent ag equipment sales data for all ag equipment categories have all trended downward and are lower year-over-year.
With all that being said, there are some of the most takeaways from AEM’s recently held webinar, which featured expert perspectives from AEM Senior Director of Business intelligence Al Melhim and GlobalData construction economist Tom Hogood:
Construction
- U.S. construction market growth is expected in 2024 on the heels of about 3% growth a 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 be infrastructure and energy/utilities.
- Growth in infrastructure will be driven by government policies such as the Inflation Reduction Act (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-year and remain on course for high yield and production, while export demand is lagging for both old crops and new crops.
- Crop production costs remain elevated, despite drops in fertilizer and fuel expenses.
- Real net farm income is the lowest it’s been 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’t playing out much better (in spite of some positive indicators on the construction side), and challenges will continue to present themselves to AEM members and underlying markets for the remainder of 2024 and beyond.
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