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Market to hit pay dirt in 2004? Metals suppliers may get a lift from machinery manufacturers next year, if economic recovery spurs long-overdue demand. (Outlook: heavy equipment)(Cover Story).

Article Excerpt
Demand for agricultural and construction machinery in domestic and export markets was flat in the first half, and is likely to remain flat for the second, but some experts predict a recovery in heavy equipment spending in 2004.

Factors affecting orders of farm and construction machinery--some positively, some negatively--include housing starts and commercial vacancy rates, state and federal highway funding, agricultural commodity pricing and farm incomes, and equipment inventory reductions.

Two positive stimuli are the federal legislation that provided $31.8 billion in spending for U.S. highways and bridges this year, and $3.1 billion in drought aid relief to American farmers through offsets in the existing farm legislation.

Although the federal farm bill "is resulting in a lot of transfer payments to farmers, it has not yet materialized in a lot of equipment sales," says Frank Manfredi, president of Manfredi & Associates, a Mundelein, Ill.-based market researcher in the heavy equipment industries.

"The agricultural market forecasts have all been trimmed back, from expected modest gains, to steady" for 2003, says market researcher Eli S. Lustgarten, managing director at H.C. Wainwright & Co. Inc., New York.

While the housing market is stable, nonresidential building is soft, so overall construction numbers are relatively flat, Lustgarten says (see related story, "Construction Viewed as Steady," page 20).

"Roadbuilding is under pressure--anything that requires state funding is a mess," he adds. "I think every state in the union is fighting budget problems. Expenditures are being limited everywhere."

With the manufacturing recession in its third year, companies are operating well below capacity and still reducing inventories. But Lustgarten points to a few positive indicators. For one, heavy-duty truck sales posted higher numbers in April. "That's a good sign for the economy. Freight movement has been up all year."

The Bush administration's new tax bill, which accelerates depreciation on capital goods, should add...