Short-Term Machinery Forecast September 2004

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					            Short-Term Machinery Forecast
                   September 2004


INTRODUCTION ............................................................... 1
MACHINERY MARKETS................................................... 1
   Equipment Coverage.................................................... 2
   Earthmoving Equipment ............................................... 3
   Material Handling Equipment ....................................... 4
   Forestry Equipment ...................................................... 6
   Agricultural Equipment ................................................. 7
   Other Equipment .......................................................... 7
THE U.S. ECONOMY......................................................... 8
INDUSTRY DEMAND FACTORS.................................... 10
   Housing Starts ............................................................ 10
   Construction Spending ............................................... 11
   U.S. Agricultural Economy.......................................... 12
THE CANADIAN ECONOMY .......................................... 13
ECONOMIC INDICATORS.............................................. 14
Short-Term Machinery Forecast 2004
September 2004



INTRODUCTION            This publication represents a milestone for Yengst Associates -- our 25th annual
                        Short-Term Machinery Forecast for the North American Service. As is the case
                        every year at this time, we pool together our extensive research on machinery
                        markets, reflecting back on the year that has past and try to reevaluate where the
                        markets for machinery are going for the remained of this year and into 2005. An
                        indispensable tool in the areas of corporate and investment planning, this short-term
                        forecast should be used primarily for updating our earlier Long-Term Machinery
                        Forecast, dated February 2004. The reader should note that any revisions to
                        estimates contained in our previous Forecasts are reflective of new information that
                        has come to our attention during the past six months. This publication updates the
                        figures in our North American database, which also includes individual company
                        estimated production and sales information by product.

                        The objective of this forecast is to address those topics that most closely affect
                        machinery demand in North America. Key to our analysis is macro-economic
                        activities affecting the U.S. and Canadian economies. This Machinery Forecast
                        covers the following five main sections:

                              Machinery Markets
                              An update to our North American Database, with previous and
                              forecasted unit production and sales numbers by machine for the
                              years 2001 through 2005. Major categories of machinery include
                              Earthmoving, Material Handling, Forestry and Agriculture.

                              The U.S. Economy
                              A review of key economic indicators, such as gross domestic
                              product (GDP), inflation (consumer price index – CPI),
                              unemployment and monetary policy.
                              Industry Demand Factors
                              A look at specific industry demand factors affecting construction
                              markets, including housing starts/mortgage rates and construction
                              spending. We also analyze select natural resource production and
                              its future affect on markets for forestry and mining equipment. As
                              they relate to the agricultural industry, we also examine historical
                              and projected indicators, such as farm cash receipts and net farm
                              income.
                              The Canadian Economy
                              An analysis of key economic indicators and industry demand factors
                              in the Canadian economy.



MACHINERY SALES /
PRODUCTION
THROUGH 2005 Yengst Associates has divided the machinery market into five segments:
                        Earthmoving Equipment, Material Handling Equipment, Forestry
                        Equipment, Agricultural Equipment and Other Equipment, which includes
                        road construction machinery, directional drills and portable air compressors.
                        Forecasted data includes estimated unit sales and production for the North
                        American off-highway machinery markets covered by Yengst Associates. All
                        estimated figures are based on the most up-to-date machinery sales information


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                                                                         Short-Term Machinery Forecast 2004
                                                                                              September 2004



                      available to Yengst Associates’ analysts at the time of publication, including
                      information relative to the various factors of demand that drive the
                      aforementioned markets.
Equipment
Coverage              As shown below, our product coverage is fairly comprehensive, accounting for a
                      total of 36 different types of equipment. As part of our North American
                      Subscription Service, more detailed analyses of these products can be found in
                      our regularly updated Equipment Analysis reports.

       Earthmoving Equipment
        Backhoe/Loaders                Crawler Dozers            Articulated Haulers       Skid-Steer Loaders
        Compact Backhoe/Loaders        Crawler Excavators        Rigid Haulers             Trenchers
        Crawler Loaders                Wheeled Excavators        Motor Graders             Wheel Loaders
        Compact Track Loaders          Mini-Excavators           Scrapers


       Material Handling Equipment
        Aerial Work Platforms           Hydraulic Cranes          Cable Cranes              Rough-Terrain Lift Trucks
            Scissor Lifts                All-Terrain Cranes                                    Vertical Mast
            Boom Lifts                   Truck Cranes             Industrial Lift Trucks       Telescopic
                                         Rough-Terrain Cranes       Internal Combustion
                                         Industrial Cranes          Electric


       Forestry Equipment              Agricultural Equipment           Other Equipment
        Wheeled Feller Bunchers          Agricultural Tractors           Asphalt Pavers
        Wheeled Forwarders               Harvesting Combines             Ride-on Compactors
        Wheeled Harvesters                                               Horizontal Directional Drills
        Wheeled Log Skidders                                             Portable Air Compressors



                      After the completion of 2003, we soon came to learn that late-year sales were
                      very strong in many product categories, helping bring year-end sales totals up to
                      or above the levels that existed in 2002. Along with continued strength across
                      key industry demand factors, such as housing starts, construction spending and
                      commodity prices, as well as encouraging economic statistics, we have
                      continued to experience significant increases in the production and sale of all
                      types of earthmoving, material handling, forestry and agricultural equipment
                      through 2004. Forecasted composite production and sales totals in each of the
                      five machinery segments covered by Yengst Associates shows projected unit
                      sales and production levels from 2003 to 2004 up as follows:

                              Earthmoving: Production +17.5% / Sales +11.7%
                              Material Handling: Production +14.8% / Sales +13.8%
                              Forestry: Production +21.6% / Sales +21.6%
                              Agricultural: Production +17.0% / +13.0%
                              Other: Production +18.2% / 14.8%

                      While production levels experienced virtually little or no change for 2003 versus
                      2002, we anticipate an average increase in output for all of the machinery
                      segments covered by Yengst Associates of almost 18 percent for 2004.
                      Likewise, the rise in sales levels for 2004 is expected to increase an average of


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Short-Term Machinery Forecast 2004
September 2004



                        around 15 percent for all five equipment categories. Over the near-term (2005),
                        Yengst Associates looks for overall demand to continue growing, but at a more
                        moderate pace.

Earthmoving
Equipment               The momentum of orders and sales that took place in the Earthmoving segment
                        in 2003 did indeed carry over into 2004. The most outstanding changes in
                        demand have occurred for mini-excavators and compact track loaders,
                        forecasted to increase approximately 41 percent and 32 percent, respectively,
                        between year-end 2003 and 2004. Those products expected to achieve growth
                        levels ranging between 15- and 20-percent over the same time period include,
                        standard and compact backhoe/loaders, crawler dozers/loaders, excavators, rigid
                        haulers, skid-steer loaders and wheel loaders (< 80-hp). Those markets with
                        anticipated growth in unit sales of less than 15 percent this year are articulated
                        haulers, motor graders, scrapers, trenchers and wheel loaders (> 80-hp).

                        Table 1: Earthmoving Equipment Sales and Production Through 2004
                        Standard Backhoe / Loaders                     -------Forecast-------    Percent Chg (%)
                                            2001     2002      2003     2004e       2005e         03-04    04-05
                         Production                                                                19.0     12.0
                         Sales                                                                     16.1     11.5

                        Compact Backhoe Loaders                        -------Forecast-------    Percent Chg (%)
                                          2001       2002      2003     2004e       2005e         03-04    04-05
                         Production                                                                14.4      15.2
                         Sales                                                                     16.1      12.3

                        Crawler Dozers                                 -------Forecast-------    Percent Chg (%)
                                             2001    2002      2003     2004e       2005e        03-04     04-05
                         Production                                                               15.0        8.7
                         Sales                                                                    15.3      10.6

                        Crawler Loaders                                -------Forecast-------    Percent Chg (%)
                                             2001    2002      2003     2004e       2005e        03-04     04-05
                         Production                                                                  --        --
                         Sales                                                                    16.0      10.3

                        Compact Track Loaders                          -------Forecast-------    Percent Chg (%)
                                           2001      2002      2003      2004e      2005e        03-04     04-05
                         Production                                                               31.7      13.2
                         Sales                                                                    31.5      12.5

                        Crawler Excavators                             --------Forecast-------   Percent Chg (%)
                                             2001    2002      2003      2004e       2005e       03-04     04-05
                         Production                                                               15.1       9.7
                         Sales                                                                    19.8      10.0

                        Wheeled Excavators                            --------Forecast-------    Percent Chg (%)
                                             2001    2002      2003     2004e       2005e        03-04     04-05
                         Production                                                               28.2      10.0
                         Sales                                                                    18.9        8.8

                        Mini-Excavators                               --------Forecast-------    Percent Chg (%)
                                             2001    2002      2003      2004e      2005e         03-04    04-05
                         Production                                                                44.4     23.1
                         Sales                                                                     41.1     14.3




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                                                                        Short-Term Machinery Forecast 2004
                                                                                                 September 2004


                      Articulated Haulers                            --------Forecast-------    Percent Chg (%)
                                             2001   2002      2003     2004e       2005e        03-04     04-05
                       Production                                                                   --        --
                       Sales                                                                      8.0      10.8

                      Rigid Haulers                                   --------Forecast-------   Percent Chg (%)
                                             2001   2002      2003      2004e       2005e        03-04    04-05
                       Production                                                                 17.1      13.5
                       Sales                                                                      17.9      13.8

                      Motor Graders                                  --------Forecast-------     Percent Chg %)
                                             2001   2002      2003     2004e       2005e         03-04    04-05
                       Production                                                                 11.1      10.0
                       Sales                                                                      11.8       7.9

                      Scrapers                                       --------Forecast-------    Percent Chg (%)
                                             2001   2002      2003      2004e      2005e         03-04     04-05
                       Production                                                                  6.7      15.0
                       Sales                                                                       6.7      12.5

                      Skid Steer Loaders                             --------Forecast-------    Percent Chg (%)
                                             2001   2002      2003      2004e      2005e         03-04     04-05
                       Production                                                                 14.4       9.8
                       Sales                                                                      15.2      11.9

                      Trenchers                                      --------Forecast-------    Percent Chg (%)
                                             2001   2002      2003      2004e      2005e         03-04     04-05
                       Production                                                                 18.4      10.7
                       Sales                                                                      18.0      10.2

                      Wheel Loaders <80hp                            --------Forecast-------    Percent Chg (%)
                                             2001   2002      2003      2004e      2005e         03-04     04-05
                       Production                                                                 21.1       13.0
                       Sales                                                                      18.4       10.5

                      Wheel Loaders >80hp                             --------Forecast-------   Percent Chg (%)
                                             2001   2002      2003      2004e       2005e        03-04    04-05
                       Production                                                                 14.9       9.7
                       Sales                                                                      12.5       9.6

                      Wheel Loaders All Sizes                        --------Forecast-------    Percent Chg (%)
                                           2001     2002      2003      2004e      2005e         03-04     04-05
                       Production                                                                 15.1       9.8
                       Sales                                                                      13.2       9.7

                      Composite: Earthmoving Equipment               --------Forecast-------    Percent Chg (%)
                                         2001      2002       2003      2004e      2005e         03-04     04-05
                       Production                                                                 17.5      11.3
                       Sales                                                                      11.7      11.5
                      Source: Yengst Associates


Material Handling
Equipment         Table 2 shows demand for equipment used in material handling applications
                      increased modestly in 2003 – on the order of 3 to 4 percent. As mentioned
                      earlier, the composite sales total for this segment is expect to rebound
                      significantly in 2004, up almost 14 percent from the previous year. Still, this
                      increased level in sales is somewhat misleading, as consumption of hydraulic


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Short-Term Machinery Forecast 2004
September 2004



                        cranes will lag behind demand for smaller products such as aerial work
                        platforms, industrial lift trucks and rough-terrain lift trucks. In fact the percentage
                        change in sales between 2003 and 2004 for hydraulic cranes and lattice boom
                        cranes averages less than 8 percent. The longer-term forecast for these
                        products is encouraging, but we expect to see less of a rise in sales growth over
                        the next five years and a modest slowing in demand by 2007 and 2008 -- in line
                        with cyclical economic slowing.

                        Table 2: Material Handling Equipment Sales and Production through 2004
                        Aerial Work Platforms – Scissor Lifts             --------Forecast-------   Percent Chg (%)
                                             2001       2002       2003     2004e       2005e        03-04    04-05
                         Production                                                                   16.0      10.5
                         Sales                                                                        12.9      11.4

                        Aerial Work Platforms – Boom Lifts                --------Forecast-------   Percent Chg (%)
                                             2001      2002        2003     2004e       2005e        03-04    04-05
                         Production                                                                   14.8       9.4
                         Sales                                                                        12.3      10.8

                        Lattice Boom Cranes                               --------Forecast-------   Percent Chg (%)
                                               2001         2002   2003     2004e       2005e       03-04     04-05
                         Production                                                                   7.9        9.8
                         Sales                                                                        8.1      12.5

                        All-Terrain Hydraulic Cranes                      --------Forecast-------   Percent Chg (%)
                                              2001          2002   2003      2004e      2005e        03-04    04-05
                         Production                                                                    8.3     15.4
                         Sales                                                                         6.3     17.6

                        Rough-Terrain Hydraulic Cranes                    --------Forecast-------   Percent Chg (%)
                                            2001       2002        2003     2004e       2005e        03-04    04-05
                         Production                                                                    6.9       9.7
                         Sales                                                                         8.0      11.1

                        Hydraulic Truck Cranes                            --------Forecast-------   Percent Chg (%)
                                             2001           2002   2003     2004e       2005e        03-04    04-05
                         Production                                                                    7.1      11.1
                         Sales                                                                         7.1      11.1

                        Hydraulic Industrial Cranes                       --------Forecast-------   Percent Chg (%)
                                              2001          2002   2003      2004e      2005e       03-04     04-05
                         Production                                                                    9.8     13.8
                         Sales                                                                         9.1     12.5

                        Industrial Lift Trucks (IC)                       --------Forecast-------   Percent Chg (%)
                                                2001        2002   2003      2004e      2005e        03-04    04-05
                          Production                                                                  14.5       9.0
                          Sales                                                                       13.0       9.0

                        Industrial Lift Trucks (Electric)                 --------Forecast-------   Percent Chg (%)
                                                2001        2002   2003     2004e       2005e       03-04     04-05
                          Production                                                                 14.2        9.3
                          Sales                                                                      15.6        9.3
                         Source: Yengst Associates




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                                                              Short-Term Machinery Forecast 2004
                                                                                      September 2004


            RT Lift Trucks (Vertical Mast)                 --------Forecast-------   Percent Chg (%)
                                   2001      2002   2003      2004e      2005e       03-04     04-05
             Production                                                               15.6        8.7
             Sales                                                                    15.8        9.1

            RT Lift Trucks (Telescopic)                    --------Forecast-------   Percent Chg (%)
                                  2001       2002   2003     2004e       2005e        03-04    04-05
             Production                                                                17.1      10.8
             Sales                                                                     15.9      10.8

            Composite: Material Handling Equipment          -------Forecast-------   Percent Chg (%)
                                 2001      2002    2003      2004e       2005e        03-04    04-05
             Production                                                              14.8%      9.5%
             Sales                                                                   13.8%      9.7%
            Source: Yengst Associates


Forestry
Equipment   The Forestry Equipment segment appears to be breaking out of its five-year
            slump. Composite sales in this segment had been dropping since 1998,
            primarily due to very weak pulp prices. Although the use of lumber has been
            strong domestically, with housing construction at peak levels, logging operators
            have experienced extremely tough times.

            Table 3: Forestry Equipment Sales and Production Levels Through 2004
            Wheeled Feller Bunchers (3-Wheel)              --------Forecast-------   Percent Chg (%)
                                2001     2002       2003      2004e      2005e        03-04     04-05
             Production                                                                30.8       17.6
             Sales                                                                     25.0       16.7

            Wheeled Feller Bunchers (4-Wheel)              --------Forecast-------   Percent Chg (%)
                                2001     2002       2003      2004e      2005e        03-04     04-05
             Production                                                                19.7       14.3
             Sales                                                                     18.2       15.4

            Wheeled Forwarders                             --------Forecast-------   Percent Chg (%)
                                   2001      2002   2003      2004e      2005e        03-04     04-05
             Production                                                                16.7      14.3
             Sales                                                                     14.3      12.5

            Wheeled Harvesters                             --------Forecast-------   Percent Chg (%)
                                   2001      2002   2003      2004e      2005e        03-04     04-05
             Production                                                                30.0      15.4
             Sales                                                                     25.0      13.3

            Wheeled Log Skidders                           --------Forecast-------   Percent Chg (%)
                               2001          2002   2003      2004e      2005e        03-04     04-05
             Production                                                                22.2      15.8
             Sales                                                                     23.3      16.7

            Composite: Forestry Equipment                  --------Forecast-------   Percent Chg (%)
                                 2001     2002      2003     2004e       2005e        03-04     04-05
             Production                                                                21.6      15.4
             Sales                                                                     21.6      16.0
            Source: Yengst Associates

            As shown in Table 3, all indications point to a much needed rebound for this
            sector in 2004, bringing composite sales and production levels up almost 15


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Short-Term Machinery Forecast 2004
September 2004



                        percent from last year. Wheeled log skidders, which comprise more than half of
                        total demand in this segment, should end the year with sales up approximately
                        23 percent.




Agricultural
Equipment               Yengst Associates’ production and sales statistics for agricultural and industrial
                        tractors includes compact utility units rated under 40-hp. Demand for smaller
                        tractors has been the dominant force behind the overall growth for all farm tractors
                        since at least 1998. Our research shows that compact utility tractors account for 60
                        percent of total tractor demand. .

                        Table 4: Agricultural Equipment Sales and Production Through 2004

                        Agricultural and Industrial Tractors           --------Forecast-------    Percent Chg (%)
                                              2001       2002   2003     2004e       2005e         03-04    04-05
                         Production                                                                 15.8       6.4
                         Sales                                                                      12.4       3.2

                        Harvesting Combines                             --------Forecast-------   Percent Chg (%)
                                               2001     2002    2003      2004e      2005e        03-04     04-05
                         Production                                                                36.6      10.8
                         Sales                                                                     35.8      10.0

                        Composite: Agricultural Equipment              --------Forecast-------    Percent Chg (%)
                                             2001     2002      2003     2004e       2005e         03-04    04-05
                         Production                                                                 17.0       6.7
                         Sales                                                                      13.0       3.4
                        Source: Yengst Associates

                        We look for tractor sales to end 2004 up just over 12 percent from the previous
                        year, with growth in the utility machines slowing down somewhat and more
                        growth occurring in the larger units. In fact, we estimate that larger tractors
                        sales will end the year up by more than 10 percent. We believe slowing will
                        occur on a cyclical basis in 2005 with demand for all size tractors increasing a
                        modest 3 percent.

                        As noted in our previous long-term forecast, harvesting combine sales suffered
                        badly in 2002 and fell again in 2003 -- barely reaching 5,900 units in North
                        America. Industry statistics through the first half of 2004 show a turnaround in
                        combine sales, jumping a strong 36 percent. We see sales of these machines
                        rising another 10 percent in 2005, reaching 8,800 units. Beyond 2005, we could
                        have flat to down demand for combines.

Other
Equipment               The Other machinery category, which includes asphalt pavers, compactors, horizontal
                        directional drills (primarily for utility and construction applications) and portable air
                        compressors, is expected to reach total composite sales of 27,360 units in 2004 – up
                        almost 15 percent from 2003. For the most part, sales declined modestly or were flat
                        for these products last year. Yengst Associates projects continued improvement in this
                        sector for 2005 with demand increasing about 10 percent. We expect 2006 to be the
                        peak year for sales of these machines, most of which are driven by highway and
                        private, non-residential and public construction.


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                                                                          Short-Term Machinery Forecast 2004
                                                                                                  September 2004




           Table 5: Other Equipment Sales and Production Through 2004

           Asphalt Pavers                                               --------Forecast-------   Percent Chg (%)
                                   2001            2002          2003        2004e     2005e        03-04   04-05
            Production                                                                               16.7      9.5
            Sales                                                                                    14.3    10.0

           Construction Compactors                                      --------Forecast-------   Percent Chg (%)
                               2001                2002          2003        2004e     2005e        03-04   04-05
            Production                                                                               22.4     10.3
            Sales                                                                                    17.3      9.5

           Landfill / Embankment Compactors¹                            --------Forecast-------   Percent Chg (%)
                                2001     2002                    2003        2004e     2005e        03-04   04-05
            Production                                                                                7.9    10.3
            Sales                                                                                     9.1      6.9
           ¹ Included in Construction Compactors

           Horizontal Directional Drills                                --------Forecast-------   Percent Chg (%)
                                  2001             2002          2003        2004e     2005e        03-04   04-05
            Production                                                                               13.5      9.5
            Sales                                                                                    11.1    10.0

           Portable Air Compressors                                  ---------Forecast--------    Percent Chg (%)
                                2001               2002          2003        2004e     2005e        03-04   04-05
            Production                                                                               16.7    14.3
            Sales                                                                                    13.6    12.0

           Composite: Other Equipment                                   --------Forecast-------   Percent Chg (%)
                               2001                2002          2003        2004e     2005e        03-04   04-05
            Production                                                                               18.2    12.2
            Sales                                                                                    14.8    10.7
           Source: Yengst Associates



THE U.S.
ECONOMY    The second quarter GDP of 2004 can best be described as generally a big
           disappointment, representing a significant slowdown following four very strong
           quarters of growth. Obviously, the key question is how long this lull will last.
           Yengst Associates’ expectations are as follows:

               We look for                                               GDP Growth
               consumer spending                                 Annual % Change in Constant $
               to not remain as
               anemic as it was             3.5%
               last quarter going
               forward, though this         3.0%
               remains a risk if job
                                            2.5%
               creation does not
               bounce back.                 2.0%
               Record gas prices
               and weak job                 1.5%
               growth took their toll       1.0%
               on spring consumer
               spending and                 0.5%
               August confidence.
                                            0.0%
               Yet, gas prices                            2001          2002           2003           2004



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Short-Term Machinery Forecast 2004
September 2004



                            have come down sharply after reaching highs in May. Household purchases began
                            the third quarter by posting a big increase.

                            Business investment spending remains strong, which should go a long way towards
                            driving this recovery forward. Optimism among CEOs is rising and the outlook for
                            profits, while not as heady as in 2003’s second half, remains sold.

                            Along with the above mentioned concerns, we expect GDP growth to remain subdued
                            in the third quarter at around 2.8 percent. Nevertheless, we do expect growth to
                            bounce back in the fourth quarter – topping 4 percent --, before settling at solid
                            growth between 3- and 3.5-percent for the year.

                        By working together, businesses and consumers all but assure that growth in the
                        second half will be stronger than it was in the first two quarters. For now, the
                        firmer tone of consumer spending is buoying overall output, while businesses
                        continue to spend greater sums on equipment.

                        Table 6: Select U.S. Economic Indicators
                                             Real GDP
                                                                         CPI            Unemployment Rate
                                              ($2000)
                                                            Seasonally
                                                %                                %              % at
                                                             Adjusted
                                              Change                           Change         Year-end
                                                             Year-end
                         Actual
                           2001                 +0.8          177.1             +1.6             5.7
                           2002                 +1.9          181.4             +2.4             6.0
                           2003                 +3.0          184.9             +1.9             5.7
                         Forecast
                            2004                +3.3          185.0             +2.0             5.4
                        Source: U.S. Dept. Of Commerce / Yengst Associates

                        At 1.8 percent, core inflation is still low by historical standards. The rate could
                        increase in the coming months, especially as the indirect effects of crude prices
                        begin to filter through to energy-sensitive sectors of the economy. The Federal
                        Reserve has now raised rates twice and looks to raise them again in the coming
                        weeks and months. The next Fed rate increase is expected momentarily at a
                        quarter of a point. Inflation fears, which pushed up bold yields in the spring,
                        proved unfounded.

                        The employment situation improved somewhat in August and the alarming
                        weakness of the prior two months turned out to not be as bad, following an
                        upward revision. The unemployment rate through August declined to 5.4 percent
                        as the number of unemployed and the labor force contracted. Overall, a number
                        of features of the payroll report were welcome and indicate that the expansion of
                        the economy is continuing:

                            Goods producing employment growth is a strong indicative of sustained activity in the
                            housing market and strong manufacturing conditions. Given sustained demand for
                            manufacturing goods and slower productivity growth, manufactures finally need to
                            hire more workers to keep up with orders.

                            Average hourly earnings have turned up; year-over-year growth is strongest since
                            September 2003.




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                                                                        Short-Term Machinery Forecast 2004
                                                                                             September 2004


                     Employment is not growing at quite the strong pace that one would expect at this
                     stage of the expansion. Payroll employment is still more than 1 million jobs below its
                     pre-recession peak. Historically, the labor market has generally been considered in
                     full swing only once monthly job creation exceeded 200,000 on a sustained basis.

                     Weakness in consumer spending is still a risk, as job growth remains tepid.

                     Given that energy prices have fallen in recent weeks, the constraint on hiring due to the
                     higher cost of energy seems to be lifting.

                 Overall, Yengst Associates expects that the labor market will accelerate through
                 the end of the year with monthly employment gains of about 150,000 to 200,000
                 through the end of 2004. Key indicators suggest that companies are planning to
                 increase hiring in coming months.



INDUSTRY DEMAND
FACTORS

Housing Starts   The latest data                             Total New Privately-Owned
                 shows construction                             Housing Units Started
                 activity related to
                 housing starts            2,200
                 beginning the third
                                           2,000
                 quarter of 2004 on
                 very strong footing.      1,800
                                           '000 (SAAR)




                 Residential
                 construction              1,600
                 rebounded in July,
                                           1,400
                 bringing housing
                 starts back to the        1,200
                 strong pace of this
                 past spring,              1,000
                 although still below               1997   1998   1999   2000   2001  2002       2003   2004
                 records set in late-
                 2003. Those
                 factors that are
                 bolstering construction activity include the following:


                 •   The fact that mortgage interest rates are still quite affordable. Despite unexpectedly
                     modest job gains of late, demand for housing remains vigorous.

                 •   Homebuilders are helping fuel demand, as some are offering incentives in the form of
                     cash for closing costs and below market rate loans to minimize the impact of any
                     increase in mortgage rates.


                 Looking ahead, as mortgage rates move up again, the impact of spent up
                 demand will take hold, curtailing housing demand. Higher mortgage rates are
                 inevitable, as the economy continues to expand and the Fed works to forestall
                 future inflation. Economic experts look for the slowing in homebuilding to be
                 most pronounced in the fourth quarter of this year.



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Short-Term Machinery Forecast 2004
September 2004



                        Table 7: New Privately-Owned Housing Units Started
                                                  Multi-Family               Single-Family                       Total
                         (000’s of units)                     %                            %                               %
                                                Units                       Units                       Units
                                                            Change                       Change                          Change
                         Actual
                           1997                 1,149          +8.4           417         +34.5          1,566            +14.3
                            1998                1,412         +22.9           380           -8.9        1,792             +14.4
                            1999                1,375           -2.6          333          -12.4         1,708             -4.7
                            2000                1,236         -10.1           296          -11.1         1,532            -10.3
                            2001                1,294          +4.7           289           -2.4         1,583             +3.3
                            2002                1,333          +3.0           415         +43.6          1,748            +10.4
                           2003                 1,461          +9.6           428           +3.1         1,889             +8.1
                         Forecast
                           2004                 1,600          +9.5           480         +12.1          2,080            +10.1
                        Source: U.S. Dept. Of Commerce / Yengst Associates

                        Multi-Family construction is reviving from a 14 - month low. While rental vacancy
                        rates appear to be turning the corner, the near term outlook for apartments is still
                        cautious. Builders have been suffering from several years of very high rental
                        vacancy rates. Investors and builders are banking on increased demand from
                        both the “echo boom” generation, which is entering their adult years, and retiring
                        baby-boomers, who will likely add to the pool of potential renters. Although the
                        longer-term prospects for this segment of the market look promising, 2005 will
                        continue to be characterized by empty units and rent concessions.

Construction
Spending                The mid-summer slowdown in construction proved not as bad as most
                        economists predicted. Aggregate construction activity in June was at worst flat
                        and July’s estimate came in slightly ahead of the consensus forecast. Single-
                        family starts surged 8.5 percent in the month of July as builders continued to add
                        inventory thanks to falling mortgage rates. In light of the fact that interest rates
                        are not going to go much higher by year’s end, we will continue to see single
                        family –housing starts around 1.6 million during the third and fourth quarters.
.
                        Table 8: Construction Spending
                        (Seasonally Adjusted Annual Rates in Current Dollars)
                         ($-Billions)       Private Construction*       Public Construction                     Total
                                            Value at        %           Value at         %            Value at         %
                                             Dec.         Change         Dec.          Change          Dec.          Change
                         Actual
                           2001               652.5          +1.5          205.8         +10.9          858.3              +3.6
                           2002               651.7             --         219.6          +6.7          871.3              +1.5
                           2003               690.0          +5.9          225.7          +2.8          915.7              +5.1
                         Forecast
                           2004               758.0          +9.4          237.0           +5.0         995.0            +8.7
                        * Includes the following categories of private construction not shown separately: highway
                        and street and conservation and development.
                        Source: U.S. Commerce Department’s Census Bureau / Yengst Associates




                                                                                                                             11
                                                                                Short-Term Machinery Forecast 2004
                                                                                                           September 2004



                    Highlights associated
                    with the most recent                                  Total Estimated Value
                    economic release on                      Private vs. Public Construction Spending: 2004
                    construction spending                                            ($ in billions)

                    include the following:
                                                                                                                  Public
                                                                                                                Construction
                         Within the private
                         nonresidential                                                                             $237.0
                         component,                                                                      24%
                         construction starts for
                         manufacturing plants
                         surprisingly posted a                             76%
                         sizeable gain in July
                         after an abysmal
                         June. In contrast,                Private
                         office construction             Construction
                         continues weak with a
                         great deal of                     $758.0
                         underutilized/vacant
                         office buildings.
                                                                           Estimated Total Value = $995.0 billion

                         There is evidence,
                         however, that several consecutive quarters of strong profit growth and concrete signs
                         of economic recovery could encourage companies to pursue development activities.
                         Overall, there is cause for optimism in this segment of the industry, particularly once
                         the pace of homebuilding begins to dissipate.

                         With the transition from residential to nonresidential, which is expected to occur over
                         the course of the next year, public-sector spending will be instrumental to this change.
                         Unfortunately, the reauthorization of TEA-21 remains mired in Washington. Despite a
                         5th stop-gap funding extension to avoid the delay of federally-funded construction
                         projects, conference committee negotiations were slated to resume after Labor Day.
                         Regardless, there is no guarantee that an agreement can be reached and a
                         contentious debate lies ahead.

U.S. Agricultural
Economy             The latest report on agricultural commodity prices shows crop prices being
                    pushed lower by favorable weather in most major crop growing regions. Record
                    yields are projected by the USDA for corn and higher yields than last year for
                    most other crops. Experts expect prices will continue to move lower into the fall
                    as crops finish developing and are harvested. Expectations are for supplies to
                    be more than adequate going into 2005, as reflected in futures prices. As for
                    livestock, prices began to turn down is recent weeks, as well. Highlights
                    associated with livestock pricing include little recent headway towards resuming
                    beef exports to Japan. Nevertheless, meat prices are likely to continue to be
                    supported by higher demand from protein-based diets.

                    Table 9: U.S. Farm Income Statistics
                    ($-Billions)                         2000         2001            2002              2003        2004F
                    Farm Cash Receipts                 $192.0        $199.8         $192.9             $212.4       $215.0
                    Net Cash Income*                      56.5          59.2           49.1              63.0         55.9
                    Net Farm Income**                     47.8          50.6           35.3              54.9         47.6
                    * The return to farm operators from sales and other cash income minus out-of-pocket expenses.
                    **Accounts for changes in farm inventories and non-cash income and expenses.
                    F– Forecast / Source: U.S. Department of Agriculture / Yengst Associates



12
Short-Term Machinery Forecast 2004
September 2004



THE CANADIAN
ECONOMY                 The latest statistics, released on August 31st, showed Canadian GDP for the
                        second quarter up a solid 1.1 percent and up 4.3 percent on an annualized basis.
                        The healthy pace of growth was driven primarily by exporting activity, which
                        boosted manufacturing activity. The Canadian dollar depreciated 3.1 percent
                        against the U.S. dollar, which provided some cushion to exports as well. The
                        second quarter marked the best showing since the first quarter of 2003, and
                        certainly outpaced the 2.8 percent rate of growth recorded in the U.S. Overall,
                        there is a great deal of upward momentum in the Canadian economy, suggesting
                        that the Bank of Canada may be nearing the beginning of a tightening cycle.

                        Gasoline prices in Canada have been the main driver keeping upward pressure
                        on headline inflation. While July’s CPI index figure does not raise concern for a
                        sharp acceleration in inflation, the fact that the Bank of Canada’s core CPI
                        measure continues to rise suggests, again, that a tightening cycle may be
                        drawing near.

                        The beleaguered Canadian employment sector has yet to replace all the jobs
                        lost between November 2002 and September 2003. Employment numbers for
                        July disappointed market expectations, by increasing a mere 9,000, as compared
                        to consensus estimates of 28,000. The fact that the Canadian economy added
                        21,000 manufacturing jobs is only partly encouraging, with the possible indication
                        of a trend given the fact that many of these jobs were added to bolster demand
                        for Canadian exports.




                                                                                                       13
                                                                                                             Short-Term Machinery Forecast 2003
                                                                                                                                                 September 2003


     ECONOMIC INDICATORS
     Output, Demand & Jobs
     (% change at annual rate)
                                                                         The Economist Poll                    Industrial              Unemployment
                                        -----GDP-----
     Country                                                               GDP Forecasts                      Production               ------Rate %-----
                                   latest                qtr*             2004       2005                           latest           latest       year ago
     Australia                    +3.2 Q1               +0.9                +3.5                 +3.3               -1.1 Q1           5.7 Jul           6.2
     Britain                      +3.7 Q2               +3.8                +3.3                 +2.7             +0.5 Jun         4.8 Jun††            5.0
     Canada                       +1.6 Q1               +2.4                +2.9                 +3.4             +3.6 May            7.2 Jul           7.7
     France                       +2.8 Q2               +3.2                +2.2                 +2.2             +2.7 Jun           9.9 Jun            9.8
     Germany                      +2.0 Q2               +1.9                +1.5                 +1.7             +2.7 Jun         10.6 Jul§           10.6
     Italy                        +1.1Q2                +1.0                +1.2                 +1.8              -0.1 Jun          8.5 Jan            8.9
     Japan                        +4.4 Q2               +1.7                +4.5                 +2.3             +8.9 Jun           4.6 Jun            5.3
     Sweden                       +3.4 Q2               +3.8                +2.8                 +2.6             +3.4 Jun           5.6 Jul†           5.0
     United States                +4.8 Q2               +3.0                +4.5                 +3.5              +4.9 Jul           5.5 Jul           6.2
     *% change on previous quarter at an annual rate. ††Apr-Jun; claimant count rate 2.7% in Jul. §EU harmonized rate 9.9% in Jul. †Not seasonally adjusted.


     Interest & Exchange Rates
                                                                                            th
                                            Interest rates % p.a. (Aug 25 2004)
     Country                         3-mth money market                  Bond yields                                              Currency units per $
                                                                                                                                        th
                                     latest       year ago        2-yr gov’t       Corp.                                         Aug 25        year ago
     Australia                        5.43                   4.86                    5.21                   6.39                   1.41               1.56
     Britain                          4.91                   3.56                    4.84                   5.75                   0.56               0.64
     Canada                           2.16                   2.68                    3.04                   6.16                   1.30               1.40
     Japan                            0.03                   0.01                    0.15                   1.70                    110                118
     Sweden                           2.01                   2.71                    2.77                   2.88                   7.58               8.48
     United States                    1.64                   1.04                    2.47                   5.75                      --                 --
     Euro area†                       2.12                   2.15                    2.48                   3.84                   0.83               0.92
     †Germany for bonds.


     Prices & Wages
     (% change at annual rate)
                                                                    The Economist Poll
                                  Consumer Prices                    Consumer Prices                     Producer Prices                   Wages/Earnings
     Country                                                                    (FCST)
                                  latest         year ago            2004                2005            latest       year ago             latest     year ago
     Australia                    +2.5 Q2            +2.7            +2.5                +2.5           +2.8 Q2          +0.2           +2.9 Q2          +5.5
     Britain                     +1.4 Jul*           +1.3            +1.5                +1.8            +2.5 Jul        +1.3          +4.4 Jun†         +3.0
     Canada                       +2.3 Jul           +2.2            +2.0                +2.1           +6.4 Jun         -2.7          +2.6 May          +3.0
     France                       +2.3 Jul           +1.9            +2.1                +1.7           +2.2 Jun         +0.9           +2.8 Q1          +2.9
     Germany                     +2.0 Aug            +1.1            +1.6                +1.2            +3.9 Jul          nil          +1.4 Jun         +2.0
     Italy                        +2.3 Jul           +2.7            +2.3                +2.1           +3.2 Jun         +1.5           +3.3 Jun         +1.7
     Japan                          nil Jun          -0.4            -0.1                +0.3            +1.6 Jul        -0.8           +0.8 Jun         +4.0
     Sweden                       +0.7 Jul           +1.8            +0.8                +1.6            +1.9 Jul        -1.5          +2.0 May          +2.6
     United States                +3.0 Jul           +2.1            +2.6                +2.3            +4.0 Jul        +2.9            +1.9 Jul        +2.9
     *New Series. RPI inflation rate in July: 3.0%


     EMERGING-MARKET INDICATORS
     Economy & Financial Markets
                                      ------% Change on year earlier-------                             Interest Rates             Currency Units per $
     Country                                       Industrial     Consumer                                Short-term                        th
                                     GDP                                                                                          Aug 25             year ago
                                                  Production         prices                                 % p.a.
     China                          +9.6 Q2               +15.5 Jul                 +5.3 Jul                  3.50                   8.28               8.28
     India                          +8.2 Q1               +7.3 Jun                 +3.0 Jun                   4.49                   46.3               45.9
     Indonesia                      +4.3 Q2              +24.0 May                  +7.2 Jul                  7.49                  9,275              8,470
     Malaysia                       +8.0 Q2              +13.3 Jun                  +1.3 Jul                  2.87                   3.80               3.80
     South Korea                    +5.5 Q2              +12.3 Jun                  +4.4 Jul                  3.56                  1,156              1,178
     Argentina                     +10.7 Q1                +8.3 Jul                 +4.9 Jul                  5.44                   2.99               2.95
     Brazil                         +2.7 Q1              +13.0 Jun                  +6.8 Jul                 15.83                   2.95               2.98
     Chile                          +5.1 Q2               +5.1 Jun                  +1.4 Jul                  1.68                    625                699
     Columbia                       +4.5 Q2              +11.7 Jun                  +6.2 Jul                  7.78                  2,572              2,855
     Mexico                         +3.9 Q2               +5.2 Jun                  +4.5 Jul                  7.32                   11.4               10.9
     Venezuela                     +13.6 Q2              +24.8 May                 +21.8 Jul                 13.07                 2,596§              1,598
     South Africa                   +1.9 Q1               +4.9 Jun                  +1.6 Jul                  7.50                   6.68               7.30
     Russia                         +7.4 Q1                +4.4 Jul                +10.4 Jul                 13.00                   29.2               32.0
     Source: The Economist, August 28th, 2004        §Floating exchange rate.




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Short-Term Machinery Forecast 2003
September 2003




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