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Uncertainty Remains Issue
For Machinery Industries
CHARLES R. YENGST IS
While the rest of the world moves along, the U.S. gov- ernment sits like a big frog
on a lily pad, waiting for something —
direction and leadership, perhaps —
to come along. Meanwhile, companies
are trying desperately to plan ahead,
make investments, and do what good
companies usually do. They can’t really move forward because the slow
growth of the economy, the uncertainties of higher taxes, an ever-growing
national debt and serious government
spending issues have them hesitant to
commit to any significant action.
On the brighter side, it is good to see
housing moving forward. Housing starts
are finally moving in a positive direction
and have reached a level in the 900,000
annual range that begins to look like old
times. Most industry observers used to
think that 900,000 starts was the lower
end of normal for the housing construction business. But that was before 2008,
when we plummeted to the 500,000 level. At least we’re beyond that for a while.
The concept of “flipping” houses has
been seen again. Yes, the terms are be-
ing advertised on the Internet and a few
articles have come forth about investors
buying houses in foreclosure or those
bogged down with higher debt than real
estate value and flipping them to new
buyers using low interest rates and
somewhat more friendly lending avail-
able from banks. Hey, whatever it takes
to get business going again. It’s prob-
ably better than nothing, even if many
of us disapprove of the methods and the
idea that banks are falling back into their
old ways to make a buck.
There is too much uncertainty in the marketplace and it is costing everyone from
the buyers of equipment to those that
make and sell it. I am not expecting business to drop into a big crack unless the
government forces a recession through
fiscal maneuvering, but I believe first half
sales for the year will be 10 to 15% below
what we had in 2012 for the same period. Second half sales will be stronger,
but probably not enough to make up for
the lost ground in the first half.
Overall, I am still expecting to see a
drop in sales of 6 to 8% in 2013, depending on the product. As always,
there will be some exceptions.
I know that some people are expecting sales to be better in 2013, but I am
still looking at it on the negative side for
now. In mining machinery, sales may
moderate from the past year or so, but
I do not look for any serious fallback to
occur unless, again, there is some unexpected action from Washington.
In agricultural equipment, I am looking
for higher sales for tractors and combines
than in 2012, although any increases will
likely be moderate since commodity prices are holding up very well.
Buyers, including the rental equipment
industry leaders, are becoming a little
more cautious with their capital expenditures. I see contractors holding back until
the level of construction activity is more
apparent. Housing will lead the way in the
construction market, whereas commercial building construction will languish and
most public construction will remain slow.
Highway spending will be about equal
to the last two years, so no real growth
there. Only higher gas taxes and a lot
more funding from the states and federal
government will get us on track with highways, bridges or mass transit.
For everyone’s sake, let’s hope Washington gets it act together soon. dp