Here’s a great sign for the US economy: the crane market is coming back to life.
In a note to clients, Citi’s Timothy Thein writes that after a recent round of checks with industry leaders, the crane market is rocking as construction picks up and projects waiting in the pipeline get the go-ahead to start.
Here are the two key takeaways for the US economy from Thein’s report:
- More Work Available — Increasing activity levels, as previously stalled projects are going-ahead, and some modest traction on rates is giving more contractors and rental houses the confidence to pull the trigger on new crane purchases. More signs that construction jobs are increasing = positive read-thru to solely North America-focused United Rentals.
- Market Strength — Increased infrastructure activity and high-rise construction are two of the major contributors cited for improving crawler demand. Very few high-capacity crawlers are used in upstream energy jobs (Manitowoc & Terex source <150MT from Japan), and our recent take-away from the Gulf Coast suggests the current wave of downstream/industrial projects (heavy users of high capacity cranes) will go ahead, though obviously sustained lower oil prices put the next big project slate at risk.
Now, two big things to keep in mind here, one good and one less so.
A reading on the crane market is a great bellwether for economic activity, as a crane is just about the most expensive piece of heavy equipment you can invest in. Back in 2013, the return of crane activity is something that Bill McBride at Calculated Risk — who nailed the housing crash and is notably bullish on the coming influx of young workers — wrote about as a harbinger of economic growth coming back.
The second thing is that Thein’s report makes clear that while the US is looking great, globally, things aren’t so hot. Thein writes:
Global Challenges Remain — Despite some improvement in short-cycle indicators in W. Europe, our sources point to a sluggish start to the year for crane demand. This coincides with still-weak construction confidence readings in March and double-digit year-to-date declines in cement volumes in certain markets like France & Germany — though tough comps are a factor. Unsurprisingly, South America remains highly-challenging.
Additionally, the strengthening US dollar looks poised to be drag internationally, and Thein also notes that the decline in oil prices will also likely contribute to a “challenging competitive landscape.”
But overall, Thein sees these takeaways as a positive for the US economy, especially in light of recent economic data has been a bit disappointing.
We’ve written before that the “terrible” winter for economic data still indicated an economy that was expanding, just not as much as economists had forecast, and this takeaway from the status of the some of the biggest, slowest moving, and most expensive pieces of industrial equipment shows that in the US, things are still humming.