SUMMARY. As we are halfway through 2023, there is more uncertainty with the economy than earlier in the year. The general consensus is there will be a recession coming soon in the United States, and now it is just a matter of whether this will happen later in 2023 or the first of part of 2024.
The latter may be more assumed recently. The stock market has not fallen, and the US economy has not entered a recession this year, 2023. Some of the factors that have prevented this are market investors being enthusiastic over AI (Artificial Intelligence) potential, the Federal Reserve’s pause in interest rate increases, and the slowdown of inflation. So seemingly the pause button has been hit on recession scenarios.
We will wait to see but this has to be thought of as good news from just a few months ago. This will have varying effects on production volume growth rates when considering different market segments and product applications. Supply chains are still hindered with long lead times and material shortages.
North American total production (all segments) is estimated to be just under 2% in 2023 over 2022.This is down from last quarter’s projection of 3%. The forecast for 2024 is fairly flat with market growth at1.8%. So, the forecasted growth rates for 2023 and2024 are low year-over-year compared to 2021 and especially 2022. A rebound of sorts is expected in 2025 of around 5% growth over 2024.
AGRICULTURAL. Agricultural machinery production for 2022 finished at 5.6% from 2021. The forecast for 2023 is now estimated at a growth rate of only 1.8%, which is down from the Q1 2023 projection of 3%. The trend has 2024 slowing to less than 1% growth over 2023. PSR anticipates 2025 to rebound to growth of 3%. After a few flat years demand should pick up and crop yield ought to be better.
CONSTRUCTION. Power Systems Research is projecting that construction equipment production will have increased in North America by 7.3% in 2022 versus 2021. 2023 and 2024 are expected to slip with growth down to flat. -1.8% and -.6%, respectively. Construction equipment’s undeveloped demand is a factor as well as higher costs, supply chain issues and some alternative drive transition. However, government expenditures for infrastructure expansions should help with new equipment demand. PSR expects growth again in 2025.
INDUSTRIAL. As stated before, the industrial segment’s growth patterns are very similar to that of the construction segment. New machinery production increased 11% last year in 2022 over 2021. Industrial equipment production is expected to slow down in 2023 and 2024. With predominant backorders, this is predicted to continue to increase into the future. This year, the growth is projected at -.6% and 2024 will be nearly flat. Forklifts are one of the primary applications to boost this market segment. PSR is projecting a rebound with a growth rate of 5.7% in 2025 over 2024.
MEDIUM & HEAVY VEHICLES. Medium and heavy commercial vehicle production is expected to increase by 1.8% this year over 2022 primarily driven by on-going pent-up demand in the class 8 segment. However, a significant slowdown in ocean bound cargo freight along with a slowing of overall freight demand will negatively impact the industry later in the year and into 2024. Continued inflation and relatively higher interest rates will also pressure demand moving forward. As a result, PSR expects a downturn in class 8 truck demand next year as truck capacity re-balances from back-to-back years of high truck production.
POWER GENERATION. As stated last quarter, the power generation segment finished 2022 at 6% over2021. Power generation production is expected to increase by 9% in 2023 over 2022. This is primarily due to strong demand from datacenters and infrastructure projects. The rise of electricity needs for the coming years will also grow demand. PSR is not projecting slow down until 2024. PSR
Jim Downey is Vice President-Global Data Products for Power Systems Research
