Worldwide demand for heavy construction equipment is projected to rise 5.4 percent per year through 2009 to $106 billion, according to a study released by Cleveland-based market research firm the Freedonia Group.
Eastern Europe, India and China are expected to lead the growth. Between North America, Japan and Western Europe, North America is expected to maintain its lead in terms of both the overall size of demand and growth potential, as the growth prospects for Japan and Western Europe will be hampered by a combination of negative demographic and structural trends, including aging populations and high levels of regulation and taxation, according to the Freedonia study.
However, future prospects remain very favorable in China, despite the recent weakening of the construction equipment market because of tightening credit policies. Construction equipment demand will benefit from China’s aggressive industrialization efforts, according to the report.
While strong equipment demand is usually foreshadowed by a combination of elements including favorable demographics and burgeoning GDP performance, Eastern Europe is a somewhat different story, as the region’s population is forecast to decline. However, based on the economic turnarounds experienced by other countries joining the EU, expected infrastructure and economic improvements should help to strongly increase construction equipment demand in the region.
Last year was a year of recovery and growth for North America, where expansion in heavy equipment construction equipment demand was driven by the explosive U.S. real estate market. Most competitors saw sales and operating profits improve after years of stagnation. Future growth is expected to remain healthy in the region. Demand for construction equipment in Japan is expected to benefit from an improvement in fixed investment activity, but the Freedonia study predicts demand to be undercut by soft public sector investment.