Equipment Mfgs. Help Economy Grow

Equipment Manufacturers Help Economy Grow

Russ Quinn
By  Russ Quinn , DTN Staff Reporter
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The John Deere factory in Waterloo, Iowa, is part of an ag manufacturing infrastructure that employs 114,000 Americans. (Photo courtesy John Deere)

The equipment manufacturing industry supported 1.3 million jobs and contributed $159 billion to the Gross Domestic Production (GDP) of the U.S. in 2016, according to new report released by The Association of Equipment Manufacturers (AEM). The report was unveiled March 9 at the CONEXPO-CON/AGG 2017, the industry's trade show in Las Vegas.

The equipment manufacturing industry had $416 billion in sales activity in the U.S. in 2016 and also generated over $25 billion in local, state and federal tax revenue in the same year. In addition, the industry generated $87 billion in total U.S. labor income in 2016.

"This new report helps to put into context the many great contributions of our industry," said AEM President Dennis Slater. "Our industry is a core part of America's manufacturing economy, and we are eager to continue to grow and hopefully with a significant investment in our infrastructure, help put millions of Americans to work."

The 50-page report breaks out some data about agriculture markets

Farm equipment manufacturing accounts for roughly 27% of the off-road equipment manufacturing industry. Manufacturers of ag machinery employed 114,000 people in the U.S. in 2016 and contributed nearly $21 billion to the U.S. GDP.

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The report also stated the demand for farm equipment will likely hit bottom soon, a slump compounded by overinvestment in new equipment prior to the recent downturn. Farmers should begin to make purchases as they had deferred their needs for several years, the report stated.

"Combines are likely to be the first area to return to their normal replacement cycle," the report said. "Combines historically have the quickest turn-over interval for the very large commercial farms that represent the core -- new combine market."

Demand for tractors fell, and the bigger the tractor was, the harder demand fell and continues to fall. There are technologies farmers want with these tractors, but only the larger farms can afford. The next level or two down in size cannot yet afford these technologies, the report said.

Roughly 30% of the U.S. agricultural equipment production is intended for global export. The industry faces issues with slow international growth as well as uncertainty about trading rules under the Trump administration.

While the U.S. has enjoyed good economic growth in recent years, this is not the case with much of the rest of the world. Economic growth in Europe is projected to slow from 1.7% in 2016 to 1.4% in 2017 with increased political instability (France, Germany and the Netherlands) and banking problems in key countries (Italy).

Growth in the United Kingdom will slow with the uncertainty surrounding the Brexit process, according to the report. Also, China's economic growth will slow further because of imbalances in credit and housing as well as excess capacity in its industrial sector.

"Any steps the Trump administration might take to revisit or exit existing trade agreements could further complicate the challenging economic environment outside the U.S.," the report stated.

"It is difficult to precisely forecast how the Trump administration might rewrite existing trading rules, but any steps that make it more difficult for manufacturers to export their productions could hinder growth in the industry."

The full AEM report can be accessed at http://bit.ly/….

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Russ Quinn