Could covid lead to record construction equipment sales in 2021?

Equipment sales are a reliable indicator of the health of the construction market, as buyers don’t generally invest tens of thousands of dollars in durable assets unless they need to. With that in mind, sales over the past year tell a surprisingly upbeat story, including the potential for a record-breaking 2021.

 

Global sales of construction equipment peaked in 2018 in 2019 at a record volume and value of 1.1 million units/$110 billion in each of those years, according to data released by Off-Highway Research during its Global Briefing Webinar on March 30.

 

Following that peak, the forecast in late 2019 was for global sales to decline by approximately 5% in 2020, in line with the usual market cycle. Conditions were seen as broadly favorable, with strong infrastructure markets around the world and reasonable residential construction activity.

 

Those forecasts, of course, changed drastically in the early months of 2020 when the Covid-19 outbreak spread into a

 

global pandemic. The immediate expectation was for a sharp decline in construction equipment sales in 2020, and that certainly came to fruition in the first six months of the year.

 

Final figures for the market in 2020, however, showed sales remained level with the volume seen in 2019. This means the global market performed better in 2020 than was forecast for a world without Covid. The key reason was the extraordinary stimulus spending in China, OHR said, which saw sales in that country rise from an already high level in 2019 by a further 30%.

 

In addition to this boost, a solid recovery in the second half of the year in most other countries of the world meant the impact of Covid and its associated lockdowns was not as severe has had been feared at the start of the pandemic. Rather than falls in sales of the order of 30%, most markets declined by 10% to 20% and the average fall for countries, excluding China, was 12%.

 

“On a global level, Covid arguably had a positive impact on the global construction equipment industry,” noted Chris Sleight, managing director for Off-Highway Research. “Looking ahead, there’s a very realistic possibility that we’ll have a record year for construction equipment sales in 2021.”

 

Long-term challenges to demand for construction equipment

 

Stimulus spending in China in 2020 kept global construction equipment sales at an unexpectedly high level last year. That buoyancy will continue in 2021 as other markets bounce back.

 

If the policy response around the world continues to be positive in the face of Covid-19, these helpful conditions could continue for the duration of the forecast. Off-Highway Research stated the ideal scenario is that as measures to protect jobs and support businesses are inevitably tapered-down, stimulus spending should come on stream to help restart normal economic activity.

 

This is a difficult balancing act and will be extremely expensive, according to OHR. There is risk in the forecast, particularly for 2022-2025, depending on government policies around the world.

 

A word of caution: The peak in global equipment sales which began in 2017 has already been extended beyond what would otherwise be expected, and the forecast foresees these very high levels of sales continuing.