More Signs of Recovery for Construction Equipment DemandBy Eli Lustgarten
Article Date: 03-01-2011
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The trend of rising prices, though detrimental to immediate contractor profitability, may spark 2011 purchasing activity.
The U.S. economy is looking somewhat better in early 2011. The most recent economic data shows that the strengthening of the economy in the fourth quarter of 2010, led somewhat by consumer spending, has continued into the first part of the new year. Further, manufacturing activity has strengthened, with the ISM reporting strong new orders and production and the PMI surging to 60.8 in January, the highest level since May 2004.
Unfortunately, construction activity still remains the most challenged sector within the U.S. economy. Housing activity continues to remain muted and the recent rise of mortgage rates to over 5 percent is not helping the meager recovery underway. The National Association of Home Builders has further reduced its 2011 housing start outlook to 688,000 (from 739,000) though still about 17 percent above the preliminary 586,000 in 2010. Improving global economic activity continues to place pressure on input costs to the construction sector. Prices are rising for most commodities, including copper, diesel fuel, steel and components such as concrete reinforcing bars and structural products, which is placing further pressure on contractor profitability and a major headwind to the recovery of nonresidential activity.
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