Is 2020 expected to be better than 2019? That's the question we are all asking ourselves as we start the New Year. We must first start by assessing how 2019 turned out.
When it comes to the construction industry and used equipment, 2019 was a good year. The market was up and used equipment volumes increased. Then, as new machine availability got better, used values dipped a bit, making it a great time to buy used equipment.
Overall, the economy avoided a predicted recession that everyone was talking about in the fall. Most economists agreed the odds of a recession heading into 2020 dropped dramatically, a prediction expected to remain in 2020 even amidst an election year.
In the construction industry and the used equipment market and values in particular, there are a few predictions one can draw based on 2019 events; areas of strength in 2020; and two key areas that have potential to grow or hinder the industry. Here’s how a couple key events and two key areas of positivity ahead present a year best summed up as one with a mix of optimism and uncertainty.
Key Areas to Watch
The election is perhaps the biggest factor that will drive the health of the construction industry and used equipment market in 2020. No matter which side of the political spectrum you’re on, election years always bring uncertainty and are tough for the industry. Elections make everyone nervous, especially in a presidential election year. Tax laws, environmental policy, government spending are all in question as the leaders in Washington change. It’s an area that companies and fleet managers will no doubt be watching and keeping in mind every step of the way.
Another area to watch closely is the labor force. As I write this, unemployment is currently at 3.7%, only slightly up from 3.5% in the fall of 2019, the lowest rate in 50 years. The AGC of America’s 2020 Construction Hiring and Business Outlook Survey reports that 52% of the almost 1,000 surveyed said they plan on increasing head count in 2020. Eighty-one percent of those surveyed also responded that they are having a hard time filling salaried and hourly craft positions.
Along with the number of workers, one concern respondents had for 2020 is worker quality, which is a key consideration when looking at things like machine technology and productivity enhancements. It seems that this will be a key factor to watch and certainly will affect fleet management decisions.
Probably not surprising to anyone, technology will continue to evolve and drive positive change in the construction industry and used equipment business. Of the almost 1,000 contractors surveyed in the AGC report, 30% plan on increasing investment in project management software, 23% fleet tracking and 22% estimating software.
"Used" Technology to Continue to Grow
The used equipment market especially has seen a boost from technology growth, with more machines already outfitted with options such as GPS machine control, which hit the used market last year. This is a trend that will continue to expand in 2020. For the machines that don’t yet have technology upgrades, more pre-owned technology is creating opportunities to easily add it, and at an attractive price point.
The concept of “used” technology may be a hard one to wrap your mind around, especially with the speed that technology evolves. However, just because a machine is not brand-new doesn’t mean it’s obsolete. For example, at RDO Equipment Co., we rent various technology systems, either on their own or on rental machines. As these tech rentals accumulate hours, it puts them at a better price point for those buyers, yet they’re still current systems.
Companies looking to purchase used machines in 2020 can be confident that, whether in-place or add-on, the technology will bring the same accuracy and efficiency benefits as new. Furthermore, the integration of technology into machines will continue to grow, both new and used. While I have yet to see a used John Deere SmartGrade motor grader on the used market (not surprising since it was just introduced last year), integrated dozers have started to become available.
The added advantage of the continued focus on technology is it offers a bright spot within the labor shortage. Attracting and retaining talent will continue to be a challenge in 2020 and beyond. Technology offers opportunities for companies to do more work with fewer people, while some systems make equipment so user-friendly, an unskilled operator can do high-quality work.
Dozer Technology Fills Operator Skills Gap
CONEXPO/CON-AGG Brings Positivity
It would be impossible to address the technology conversation, and 2020 in general, without talking about CONEXPO/CON-AGG. It’s the biggest U.S. show for our industry, and between exhibits, education sessions and networking, there’s something for everyone.
Anyone heading to Las Vegas in March for CONEXPO will get to see the industry’s technology focus first-hand, as the tech experience is a key theme of the 2020 show. I expect to see that resonated throughout the exhibitor booths, and not just the large manufacturers, but all manufacturers.
A strong turnout at CONEXPO will no doubt set the tone of the industry for a great 2020. All preliminary indicators are that it could be a record year for the event. I’m optimistic that it will be the show’s biggest yet and draw a record number of attendees as companies look to invest in their people, consider diversifying to meet new demand and seek to stay up to date on the latest offerings to make their businesses more efficient and effective.
All in all, it’s safe to say that it should be a good year. However, with this being an election year, I will only predict that the first half should be as strong or potentially stronger than 2019 for the construction industry and used equipment market. Investing in the growing population with housing starts, infrastructure improvements and other construction work isn’t going away. Companies that invest in their people, technology, and the equipment needed to get the job done will be poised for another successful year.
