Machinery Exports in March: Developed Markets Slow Down, Middle East Weighed by Conflict

Overview

This is a March 2026 update on tracked machinery exports from China and Japan released by Goldman Sachs. It notes that following a very robust growth at the beginning of the year, there has been a moderate slowdown in demand for machinery exports within developed markets (DMs) in March, largely influenced by a cooling down in China's export growth rates. Meanwhile, emerging markets (EMs) have shown relative resilience overall, with strong performance seen in Latin America, Africa, and Southeast Asia driven entirely by robust Chinese exports. However, the Middle East suffered significant declines due to ongoing geopolitical conflicts. By dissecting volume and price changes across various regions, this report provides high-frequency insights into global construction machinery industry sentiment.

Core views

Overall Trend: Combined machinery exports from China and Japan grew by 12% year-over-year in March, lower than the first-quarter figure of 27%. Specifically, China’s exports rose by 16% year-over-year (first-quarter: 26%), while Japan’s exports grew by 13% year-over-year (first-quarter: 34%). This indicates a return to more tempered adjustments post-early-year highs. Divergent Performance & Slowdown in Developed Markets (DM): In North America, volumes exported decreased by 4%, though values grew by 15%, indicating some pricing support or shifts in product mix. Chinese exports to North America fell by 20% in terms of volume, whereas Japanese exports saw about a 20% increase in both volume and value. European exports recorded increases of 27% and 17% respectively in volume and value during March, significantly slower compared to first-quarter figures of 50% and 26%; despite Japan maintaining strong export performance to Europe (both volume and value up by over 30%), China’s export growth to Europe notably slowed down. Resilience in Emerging Markets (EM) Despite Middle East Setback: Export volumes and values to Latin America surged by 47% and 17% respectively in March, predominantly supported by robust Chinese exports (volume increase of 55%) offsetting any decline from Japanese exports. Both volumes and values to Southeast Asia grew approximately 10%, similarly backed by Chinese exports. African exports continued steady growth around 30%. Conversely, the Middle East faced severe downturns due to continuous conflict, seeing export volumes and values plummet over 40% each month, dragging the entire Middle East and Africa segment into negative territory. Oceania Market Maintains Strength: Exports to Oceania recorded significant growth of 50% and 17% in volume and value respectively, reflecting sustained demand in the region.

Analysis framework

The firm employs a 'dual-source tracking method' involving China and Japan to monitor global machinery demand. Given that China and Japan account for roughly 70%-80% of off-highway excavators supply globally outside their domestic markets, their export data offers highly representative insights. The report analyzes changes in quantities and prices from both countries and integrates historical correlation analyses (e.g., with revenues of industry giants like CAT, Volvocorrelations reaching 0.8-0.9), to filter out noise caused by supply chain shifts thus offering a clearer reflection of real end-market demands. For example, Japan’s exports better reflect demand patterns in Western developed economies, whereas China’s focus lies more prominently on emerging markets.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply and Demand Framework

  Using export data from major suppliers (China and Japan) as proxies for global demand variables

  Given China and Japan's dominant roles in the global machinery supply chain, fluctuations in their export volumes directly mirror demand strengths across different world regions—a streamlined top-down approach to demand tracking.

• Quantitative/Factor/Portfolio TheoryOthers

  Backtesting Correlation between High-Frequency Data and Financial Reports

  Calculating correlation coefficients between export data and quarterly revenue figures from leading firms (like CAT, Volvo) verifies the predictive efficacy of high-frequency export data regarding sectoral prosperity helping investors anticipate earnings trajectories before formal financial disclosures.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Caterpillar (CAT)

  Benefit/Damage Logic: Its revenue streams in North America and Europe strongly correlate with Japan's export data (correlation coefficient ranging from 0.87-0.89)

  Strengths

  Possesses substantial pricing power and brand barriers within developed markets

  Comparison

  More reliant on mature European and North American markets compared to Chinese manufacturers

  Risks

  Further slowdown in developed market demands

• Komatsu

  Benefit/Damage Logic: Global demand trends closely align with aggregate export data from China and Japan

  Strengths

  Extensive product lines coupled with strategic layouts in both China and Japan

  Comparison

  Serves as a balanced intermediary between Chinese and Japanese manufacturers

  Risks

  Underperformance in emerging markets

• Chinese Construction Machinery Manufacturers

  Benefit/Damage Logic: Their export growth is primarily propelled by demand in emerging markets such as Latin America and Southeast Asia

  Strengths

  Competitive cost-performance ratios and steadily increasing market shares in emerging zones

  Weaknesses

  Relatively low penetration in high-end European and North American markets

  Comparison

  Complementary market positioning vis-a-vis Japanese counterparts

  Risks

  Geopolitical risks and trade protectionism

Key data

• Month-on-Month Growth Rate of Combined China-Japan Exports in March+12% yoyA noticeable deceleration compared to Q1's growth rate of 27%
• Year-on-Year Growth Rate of China’s Exports in March+16% yoyFirst Quarter: +26%
• Year-on-Year Growth Rate of Japan’s Exports in March+13% yoyFirst Quarter: +34%
• Volume Growth Rate of Exports to North America in March-4% yoyChina's exports to NA dropped 20% in volume; Japan’s rose by approx. 20%
• Value Growth Rate of Exports to the Middle East in March-40%+ yoySeverely impacted by regional conflicts

Impact & implications

The report suggests that the slowdown observed in March does not imply an impending collapse in global demand but rather represents a normalization after initial momentum. Investors should pay attention to the sustainability of demand in developed markets alongside long-term implications of geopolitical tensions affecting the Middle East. Continued expansion of Chinese enterprises in emerging markets sustains their export performance, while Japanese counterparts maintain competitiveness in premium segments within Europe and North America. Future vigilance is warranted against potential disruptions to global supply chains arising from escalations in Middle Eastern conflicts.

Risks

• Escalation of geopolitical conflicts in the Middle East could lead to prolonged demand contraction there, spilling over effects onto neighboring markets
• Increased risk of economic recessions in developed markets (especially North America and Europe) might trigger drastic cuts in machinery capital expenditures
• Potential disruptions in global supply chains or resurgence of trade protectionist policies impacting流通of machinery products originating from China and Japan

What to watch

• April and early second-quarter machinery export data from China and Japan to confirm if the March slowdown was merely temporary volatility or indicative of a trend reversal
• Evolution of situations in the Middle East and its potential influence on reconstruction-related demand
• Guidances issued by key machinery producers (such as CAT, Volvo) concerning regional demands featured in their upcoming first-quarter earnings reports