Metalworking Forecasting Tools

Construction Machinery

Construction machinery is used in a number of industries and are exported in significant quantity. So, even though the U.S. housing market is just one of many in which construction machinery is used, we can use it as a leading indicator for the production of construction machinery. The chart below shows that the Fed Funds rate is a good leading indicator of housing permits (before a home is constructed the builder must get a permit). We've inverted the scale for the year over year change in the Fed Funds rate because as rates go down homes become more affordable, which means the number of permits should increase. On average, changes in the Fed Funds rate lead changes in the rate of change for housing permits by 12 months.

The chart below shows that housing permits are a good leading for industrial production of construction machinery. As new neighborhoods are built, developers need new equipment to build roads and sewers and builders need equipment to build foundations. On average, changes in housing permits lead changes in construction machinery industrial production by eight months.

Industrial production of durable goods leads machine tool unit sales. For the construction machinery industry, this seems to be the case as well. The construction machinery industry also seems to be one of the more volatile industries in regard to machine tool sales.