Trendlines: What’s next for construction equipment in North America?

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The North American construction equipment market reached an all-time high of more than 318,000 machines sold in 2022. Further growth is unlikely this year, but Off-Highway Research believes volumes will remain strong for the foreseeable future.

The last two years have seen a remarkable surge in construction equipment sales, with low interest rates and working from home driving a sharp spike in residential construction. That took demand for compact machines such as compact track loaders and mini excavators to unprecedented highs.

The interest rate rises of the last year have served to cool residential building to some extent, as shown by data on new building permits. But so far, it seems to be a case of activity plateauing at a high level, rather than a downturn taking root. On the one hand, the market needs to cool from the sudden spike in activity, yet at the same time the U.S. has a housing shortfall of anywhere between three and six million units and it will be the work of many years to redress this.

Small is big

One possible area of concern is that sales of smaller machines have been so strong for the last two years that there is now a large population of relatively young equipment in contractor and rental fleets. They could be a barrier to new machine sales if there is a slowdown in building work.

But that has certainly not materialized yet. The key factor which informs the buoyant forecast for this year is that OEMs still have huge backlogs and lead times remain long. This provides a lot of certainty for at least the first half of 2023, and perhaps further on into the year. Those of a nervous disposition will keep a wary eye on new orders and, of course, if the economy tightens too far there could even be order cancellations. But so far, so good.

Big is beautiful

And while the focus has been on lower volume compact equipment, it is also important to mention that sales of larger machine types were also record breaking in 2022. Crawler excavator sales went over 40,000 units for the first time and more than 30,000 wheeled loaders were sold in North America last year – another record.

Even machine types that have fallen out of favor over the last decade or so such as skid-steer loaders and tractor loader backhoes saw an uplift in sales in 2022, although the volumes are much lower than the historic highs of yesteryear.

A key pivot

Chris Sleight, managing director, Off-Highway Research.

This points to another key trend that Off-Highway Research sees in the market – a pivot more toward infrastructure work. The stimulus spending that was announced during the pandemic is now becoming a reality on work sites throughout the U.S. and Canada, and that is driving sales of bigger machines. Off-Highway Research believes that as much as $60 billion will be released in the 2023 financial year.

We are not expecting a spike in sales in the same way that we saw for compact machines. Larger machines tend to be very long-lived and in a mature market like North America there would have to be extraordinary drivers in place to trigger the kind of multi-year, double-digit rise in sales which we saw for compact equipment.