Russia holds back Europe

17 March 2016

A decline of 2.5% was seen in the European construction equipment market in 2015, but CECE (the Committee for European Construction Equipment) said that excluding Russia, the figures showed growth of 3.5%.

It added that a slight increase in the market was forecast for 2016.

The CECE Annual Economic Report contains sections on the macro economic situation, the performance of the construction sector, the main markets and main segments of the European construction equipment industry and – for the first time this year – a section on the mining industry, which CECE said reflected its impact on machinery sales.

The report found that construction equipment sector had seen a decline of 2.5% in 2015, which it attributed primarily to the market situation in Russia. However, CECE said that overall, there were encouraging signs of improvements in machinery demand.

Building construction equipment performed better than civil engineering equipment, earthmoving and road construction machinery, said CECE.

The report said that the growth of the European construction equipment sector seen in 2014 could not be sustained in 2015. However, Sebastian Popp, economic expert at CECE, said, “What looks like bad news needs to be interpreted carefully.”

He said that within Europe, market developments had been highly diverse – a phenomenon which was apparent even in the large volume markets.

“We saw growth of almost 40% in Italy, but also declines of 25% in France,” said Popp. “France had a very bad year, but showed clear signs of stabilisation towards the last quarter.”

‘Pillars of growth’

The report found that Central and Eastern European countries and Southern Europe were “the pillars of growth”, though from very different starting points. Germany, the UK, and the Nordic Countries remained “the anchors of stability”.

The continued free fall of the Russian market was a decisive factor, said CECE, saying it distorted the overall market statistics. Sales in Europe excluding Russia saw growth of 3.5%, ranking Europe without Russia in the top three performing regions in the world in 2015, behind only the Middle East and India.

CECE said that in an environment that lacked any clear drivers of growth, and against a backdrop of declining world equipment sales – which it put at -11% – Europe should be seen as a positive example.

It said that it was notable that the European construction equipment sector remained an exporting industry. It found that even with declining worldwide sales, exports from Europe to the world grew slightly, by 4% in the first 10 months of the year.

The CECE Barometer showed significant growth in the last quarter of 2015 and the first quarter of 2016. CECE pointed out that the index was clearly in a positive zone, which suggested a positive first half of the year when it came to equipment sales.

Looking at the European market in 2016, CECE said it seemed most likely that the recovery in Southern Europe would continue – particularly in Italy and Spain.

Fuelled by infrastructure investments, Central and Eastern Europe should continue its growth, it said. It forecast that France could win back a portion of what was lost in 2015, while the high volume markets like Germany, the UK, Nordic countries, Benelux, and Austria and Switzerland were not expected to see further growth. However, CECE said a slump was not expected either.

Political issues

It went on to say that Turkey had the potential to accelerate growth further, but that political issues could limit investment activity.

No significant change is expected for Russia, however. CECE said that overall, this translated into a modest single-digit growth rate as the most realistic scenario for sales in Europe.

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