AEM Members Weigh in: Supply Chain Issues, Inflation to Remain Persistent Challenges Heading into 2023

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9/29/2022

Supply Chain and InflationBy Benjamin Duyck, AEM Director of Market Intelligence —

The more things change for the equipment manufacturing industry and the customers they serve, the more they stay the same. Supply chain issues and inflation remain persistent concerns, and the consensus among AEM members is they will continue to adversely impact the agriculture and construction equipment markets for at least the next year, if not longer.

The association regularly surveys its members regarding their thoughts on various economic trends and how they are affecting their efforts to do business, both within the United States and abroad. The information obtained through these quarterly Industry Conditions Surveys is detailed in AEM's Business Intelligence Dashboard and then later summarized in AEM’s quarterly Equipment Market Outlook Webinars.

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With summer now behind us, and 2023 just a few short months away, here are a few key data points from our most recent member survey and quarterly webinar regarding what equipment manufacturers can expect in the weeks and months ahead:

  • The construction equipment industry remains in the boom cycle, but that boom cycle is slowing down. The Net Rising Index for demand over the last 12 months and the next 12 months are both positive, but they have deteriorated from recent highs. The majority of AEM members reported growth over the last year, while less than half of those who were surveyed showed growth over the last quarter. For the next year, normal or above normal growth should be expected. 
  • Perceptions of the agriculture equipment industry are more positive, but optimism is weighed down by several headwinds. An overwhelming percentage of AEM members feel the whole goods segment experienced growth over the last 12 months, and more than those in the parts segment who were surveyed. For the next 12 months, more than half of members who responded indicated they expect normal or above-normal growth.
  • Inflation remains a concern for both ag and construction, as well as the U.S. economy. Inflation makes equipment more expensive to produce, lowering income for ag and construction equipment end users. At the same time, higher expected interest rates meant to combat inflation will make mortgage rates and loan rates/cost increase. While some reports do show inflation slowing down over summer, it remains to be seen if this is just a blimp, or if the Federal Reserve’s policies are working.
  • While supply chain issues are disruptive on their own, they are also contributing to inflation. Almost every single member continues to experience supply chain issues. Not all that long ago, things were getting worse for about more than two-thirds of AEM members who were surveyed. Now, thankfully, about half of association members who responded reported seeing improvements. It seems we’ve reached a turning point.

So, when do our members feel these issues will subside? It’s a question easier asked than answered. Perhaps year-end 2023 is the best guess right now, but it should be noted a greater percentage of manufacturers are now indicating they expect supply chain issues and inflation to persistent beyond next year.

Learn More: Contact Your Account Success Advisor

In addition to its quarterly Equipment Market Outlook Webinars, AEM continues to offer a wide range of other market data products, including reports, whitepapers and public market intelligence highlights. To learn more, contact your Account Success Advisor.

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