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AUG 2019

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68 • ROCK products • August 2019 www.rockproducts.com Aggregates Industry Almanac Equipment Update A fter two consecutive years of solid growth, equipment and software investment growth is likely to slow in 2019 to 3.9%, down from 4.5% in the second quarter, according to the third-quarter update to the 2019 Equipment Leasing & Finance "U.S. Economic Outlook" released by the Equipment Leasing & Finance Foundation. Business conditions for the equipment finance industry soft- ened in the first half of the year as the U.S manufacturing sector weakened, and investment growth in several key verti- cals is expected to slow or contract in the second half of 2019. Jeffry D. Elliott, Foundation chairman and senior managing director of Huntington Equipment Finance, said, "Consumer confidence has eased this year while consumer spending has moderated. Large businesses are showing signs of pull- ing back, though small businesses remain upbeat. In light of stronger-than-expected growth in first quarter, the econ- omy is expected to grow 2.5% in 2019, up from the previous estimate of 2.2%." Highlights from the report include: Capital spending slowed in the beginning of 2019, consis- tent with declining macroeconomic fundamentals. Business investment faces further downside risk if the industrial sector continues to fade, and trade relations remain turbu- lent. Although banks continue to tighten lending standards to consumers amid waning credit demand among businesses and consumers, overall credit market conditions remain mostly healthy. Financial stress remains relatively low by historical standards, though both delinquencies and charge- offs are on the rise. After achieving 2.9% growth in 2018 – tied with 2015 for the strongest year of growth of the current business cycle – the U.S. economy expanded at a healthy 3.1% pace in the first quarter, exceeding expectations. However, trade frictions are undoubtedly contributing to the softness in the U.S. manufac- turing sector, which continued to struggle in second quarter and does not appear to be on the verge of a rebound. Though domestic oil production has been a key bright spot for the U.S. economy and the increasingly dovish Federal Reserve has helped buoy financial markets, there are several risk factors that merit close attention for the rest of the year. Risks include the efficacy of China's efforts to stimulate its economy, the divergence between small- and big-business optimism, and the potential for a protracted slowdown in consumer spending later this year. The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economic and public policy consulting firm Keybridge Research. The economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook, and key eco- nomic indicators. The third-quarter report is the second update to the 2019 Economic Outlook and will be followed by one final quarterly update before the publication of the 2020 Economic Outlook in December. The Foundation-Keybridge U.S. Equipment & Software Invest- ment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals. In addition, the "Momentum Monitor Sector Matrix" provides a customized data visualization of current values of each of the 12 verticals based on recent momentum and historical strength. Several equipment verticals should expect their growth outlook to remain steady in the second half of 2019. Over the next three to six months: • Construction machinery investment growth is likely to weaken further and potentially stall. • Materials handling equipment investment growth is likely to weaken and may turn negative. •  All other industrial equipment investment growth will likely weaken and may stall. • Mining and oilfield machinery investment growth is likely to remain steady. •  Aircraft investment growth is likely to remain negative. • Ships and boats investment growth may remain slug- gish and may stall. • Railroad equipment investment growth is unlikely to improve and may worsen. • Trucks investment is expected to grow moderately. • Computers investment growth will likely continue to weaken, potentially into negative territory. • Software investment growth should remain solid. Aggregates Equipment With a continued hope for a new federal infrastructure bill, producers plan to spend some money in 2019, building on 2018. Just over 43% of respondents to Rock Products' Bench- mark Survey, released earlier this year, said they increased capital spending last year. This year approximately 29% of the survey group plan to spend up to $500,000. Another 29% of the survey group planned to spend $5-10 million, a nice jump from last year Equipment Update A Big-Picture Look at Issues in the Equipment Market.

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