IDA Universal

Trends and Tidbits Continued from page 18 IDA Universal Aug - Sept 2025 20 Q2 2025 GDP to 4.6%, the same day that the Organisation for Econom- ic Co-operation and Development (OECD) reduced its U.S. GDP growth forecast to 1.6% in 2025 and 1.5% in 2026, and e Wall Street Journal con- sensus economic forecast for 2025 U.S. GDP fell under 1%. e probability that any material insight into the timing of the reso- lution of any of the numerous issues remains highly uncertain. One thing seems clear, it's going to take signifi- cantly more time to find solutions to these problems. For example, there are workarounds for the U.S. legal tariff fight using existing trade laws: Section 122 of Trade Act of 1974 (up to 15% tariff for 150 days); Section 232 (des- ignate other national security sectors in addition to steel, aluminum and autos); Section 301 (investigation of sectors); and Section 338 of the Tariff Act of 1930 (up to 50% tariffs on im- ports for countries that discriminate against the U.S.). Bottom line is to hope that the off-highway markets do bottom by mid-year and muddle through into likely 2026 awaiting resolution of the numerous issues impacting invest- ment-making decisions. Construction Equipment: Political Issues Can Dampen Any Re- covery Entering 2025, the construction sector was braced for a weak first half as construction spending continued to soften reflecting the fear of a slow- ing economy, higher interest rates for longer and sticky inflation. More importantly, manufacturers react- ed to the glut of inventory focusing on inventory liquidation spurred by merchandising programs and targeted price discounts. Demand in Q1 2025 for construction equipment came in somewhat bet- ter than manufac- turers expected. Most manufac- turers therefore continued their expectation of a relatively flat 2025 for glob- al construction activity with a modest decline in the U.S. construc- tion equipment manufacturers reiterated their forecasts for a 5% to 10% revenue decline in 2025 in the U.S. and flat to down 5% globally. Farm Equipment: Any Recovery May have Been Delayed Until Next Year Farm equipment manufacturers expected a very weak first half of 2025 with production down sharply to reduce new and used inventories led by a 26% decline on production at CNH and 33% at AGCO. Actual fi- nancial results for manufacturers came in somewhat better than expected reflecting favorable pricing, favorable product costs and greater efficiencies which help offset production cuts and the initial impact of tariffs. Nevertheless, with inventories still elevated, the industry has slightly tweaked downward its weak forecast for 2025 of a decline of 25% to 35% for large tractors and combines, a de- cline of 5% to 15% for small tractors and flat to down 10% globally. With farm equipment sales project- ed to fall to about 85% of mid-cycle demand, the expectation was that de- mand in the industry will bottom in mid-year setting the stage for a recovery when fundamentals improve. Hope was building for a possible improvement in demand in the second half of 2025 helped by a dramatic surge in govern- ment payments to $42.4 billion (versus $9.6 billion in 2024). That hope seems to be fading with the heightened political activity since the beginning of Q2 2025 particularly related to reciprocal tariffs. Purdue Univer- sity/CME Group Ag Economy Barometer indicates farmer sen- timent has continued to improve, reflecting a more optimistic outlook for exports and a less negative view on how tariffs will impact 2025 income. The farm capital index has come off its recent high to 55, but that is still well above the 35-37 index level of the past three years. Recent events on tariffs and im- migration would seem to dampen the optimism. Farm equipment

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