The DOW is up, the S&P just hit a 10 year high, and all signs point to a strong economy, not just in the U.S., but around the world. This is great news for manufacturers of construction equipment, as this means an increase in new construction and an increase in equipment sales.
Construction has always experienced cycles of boom and bust. Most recently, the industry felt the effects of the recession close to a decade ago, starting in 2008 and peaking in the United States in 2010. Since that time, the construction market has steadily trended upwards, both in projects and in the demand for heavy equipment as evidenced by the whopping 25% spike Caterpillar reported in their quarterly revenue.
Construction as an industry has always depended on growing markets to help increase sales. One of the driving factors in demand for construction work and equipment is the growing public-private partnerships in India and China as both Asian giants have sought to expand their infrastructure. China in particular saw a government spending boom of close to $600 billion U.S. This single investment was enough to drive global equipment sales, even at a time in which established markets in the U.S. and Europe were still struggling under the recession.
But the arrow hasn’t always pointed up. The Chinese market slowed down a bit from 2012 to 2016, during which time improvements in other markets failed to offset this drop. 2015 and 2016 also saw a depression caused by low commodity prices, which directly impacted the economies of countries dependent on commodity exports.
Other factors that have harmed the market are questions about the impacts of the U.S. presidential elections and UK’s Brexit. While these issues still have some questions lingering about them, investors now feel much more confident investing in building projects.
Market researchers and forecasters feel that the worst is now behind us and the future looks bright, as far as the global construction industry is concerned. Retail sales of construction equipment are expected to rise by 8% by the end of this year, the first time sales have risen since 2012.
And it’s construction of all types that are driving this growth. The real estate market has been growing at a record pace this year. Demand for housing in many markets across the U.S. has far out-paced supply, leading to an intense market. In the face of this demand, it only makes sense that new developments would spring up.
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