Construction equipment production steady in 1998
By Daryl Delano -- Industrial Distribution, 1/1/1999
Despite lethargic growth in the nation's non-building construction sector this year, and a "challenging" environment for exports, construction equipment output gains continued strong in 1998. After lagging in the 1980s, construction machinery production gains have far surpassed overall manufacturing production growth in each of the past six years.For all of 1998, it appears that total manufacturing output will be up about 3.6% from 1997 levels. For the construction (and allied products) industry, production gains will be almost three times as strong, with a projected gain of 9.8%.
Total heavy construction spending was expected to grow by only about 1% during 1998, but was on the upswing toward the end of the year. The major reason for this turnaround is the same reason that almost all signs point to a better 1999 for non-building construction: the new transportation infrastructure legislation, TEA-21.
Highway construction work, which accounts for well over half of the public non-building spending total, has been basically flat during 1998. This won't be the case in 1999, however, thanks to the construction money authorized in the new TEA-21. The highway obligation limit set in the final Department of Transportation appropriation is set at $25.5 billion for FY 1999 -- an increase of $4 billion from FY 1998. This should ensure further solid gains in construction equipment output for at least the next few years.
Highway spending is vitally important to the heavy construction industry, and to the U.S. economy as a whole. During the past decade and a half, almost five out of every eight public dollars spent on transportation infrastructure were spent on highway/street construction. And special studies have documented the considerable multiplier effect that highway construction spending has on the U.S. economy. It is estimated that for every one dollar of public money that is invested in the nation's highways, another $1.13 worth of new business is generated in companies that are not part of the country's construction sector. Almost half of this extra business goes to manufacturing firms that are critical suppliers to the construction industry.
The one manufacturing industry that is most directly effected by the fortunes of the nation's heavy construction sector is the construction machinery industry. Annual output gains in this industry have been much better than overall manufacturing production gains in every year since 1993. In this six-year period, U.S. construction machinery production has grown by an average of 9% annually -- about twice the annual gain in total industrial output. The dollar-value of the construction machinery industry's production has grown by an even stronger 11.2% a year over the same period of time.
Since 1993, the current-dollar value of shipments coming from the nation's construction/mining/materials handling industry sector has grown by an average of 11.4% annually. The total value of shipments from the industry during 1998 are estimated to have reached more than $50 billion -- over 80% more product value than was shipped during the last "down" year of 1992.
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