SOURCE: Freedonia Group

August 31, 2005 11:55 ET

World Heavy Construction Equipment Demand to Reach $106 Billion in 2009

CLEVELAND, OH -- (MARKET WIRE) -- August 31, 2005 -- Worldwide demand for heavy construction equipment is projected to rise 5.4 percent annually through 2009 to $106 billion. Growth will be supported by the expected continued expansion of emerging markets, with high points including Eastern Europe, India and China. Within the Triad (i.e., 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. These and other trends are presented in "World Heavy Construction Equipment," a new study from The Freedonia Group, Inc., a Cleveland-based industrial market research firm.

Future prospects remain very favorable in China, despite the recent weakening of the construction equipment market due to tightening credit policies. Construction equipment demand will continue to benefit from China's aggressive industrialization efforts. 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.

Within the Triad, 2004 was a year of recovery and growth for North America, where expansion in heavy construction equipment demand was driven by the explosive US 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 will benefit from an improvement in fixed investment activity, but is expected to continue to be undercut by soft public sector investment. Most West European markets are expected to post only moderate construction equipment growth, with even strong-performing Spain experiencing a tapering-off of demand. The strong euro -- combined with an aging population, political turmoil over the European Union itself, and other constraints -- foreshadows moderate growth at best for the region.

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