Caterpillar Inc. reported second-quarter sales that beat analysts’ expectations, although the company suffered a downturn in China, a key construction equipment market.

Revenue from products sold was $13.54 billion, below the average estimate of $13.98 billion by 17 analysts polled by Bloomberg, the Deerfield, Illinois-based company said Tuesday in its quarterly report. Caterpillar, often regarded as an economic leader, said construction equipment sales in the Asia-Pacific region fell due to declining end-user income in China. The equipment manufacturer also stated that “unfavorable manufacturing costs largely reflect higher material and transportation costs.”

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Shares of Caterpillar fell 3.1% on Tuesday in New York premarket trading.

Caterpillar’s results were released a week after government data showed the US economy contracted for the second quarter in a row, sparking investor fears that the country could face a recession. Shares of Caterpillar are down about 5.8% this year as the manufacturer grapples with headwinds linked to supply chain issues, rising electricity prices in Europe and Covid plant closures in China.

Caterpillar has previously said that China accounts for approximately 5% to 10% of the company’s total sales.

Rising inflation around the world exacerbates the company’s problems. Analysts at Bloomberg Intelligence said rising transport and material costs weighed on profits for the maker of iconic yellow construction and mining equipment. The company still has room to raise prices to offset rising costs, BI said.