Issue link: http://read.dmtmag.com/i/101441
Regions With the GDP rising at 1.5 percent, the economy is improving just enough for ���someone��� to say it is improving, but not enough for many people to feel it is improving. When a banker tells you that the full effect of the projected fiscal cliff will put us into a recession it is difficult to hold on to any positive outlook for 2013. There are enough downside indicators to hope for a flat market. Unemployment in the region is still extremely varied. Rhode Island has the second highest in the nation, while New Hampshire and Vermont are very close to theoretical full employment. Delays associated with the passage of MAP-21 seem to have disrupted the flow of work from the Massachusetts DOT; there are few new construction projects currently slated for 2013. New Hampshire continues with large amounts of roadwork scheduled for the coming season, while Maine is planning to spend at levels less than 2012. Connecticut plans to take advantage of all federal monies available in 2013. The largest contractors in the region have work and many have quality backlog. Design build continues to increase within the construction project offerings, especially in the bridge construction arena. As with the prior year, wellcapitalized, professional contractors who can take on larger jobs are doing better than smaller contractors. Often smaller infrastructure jobs are funded locally, and many cities and towns are not able to fund those projects currently. The aggregate markets ��� crushing and screening ��� have leveled off and a few quarries that were shut down in 2010 have re-opened. Machine utilization in the region continues to improve and service and maintenance work has remained steady. The lack of quality technicians has once again surfaced as a priority for dealers. Real estate professionals in New England are still predicting a slow recovery for the new housing market. Pending home sales in Massachusetts were up in October about 36 percent year-over-year, having gone up each of the previous 17 months. Reduced inventory in some areas is driving prices up; however, in other areas, including Rhode Island, prices are still dropping. The actual numbers of foreclosures in Massachusetts are down; however the number of petitions for new foreclosures has increased about 20 percent. Could this be a Robo Signing side effect? Demand for housing units in New England is projected at levels of more than 10,000 units per year for the next eight years; these are units required to match job growth in a healthy economy. There is a general feeling in the region that public spending will be down, and there will be some increase in the amount of private construction. Private construction of medical office buildings is on the rise, as well as high-end, mixed use retail anchored developments are providing higher quality spaces than existing strip malls. New England has fairly high utilization of retail space, and office space utilization is improving. Still lurking is the potential for more municipal financial crises. Monies available for public construction and monies to match federal spending are being squeezed by pressures from pension and insurance liabilities on one side, and by education and public safety spending on the other side. The Pew Research Center reports that about 10,000 Baby Boomers will turn 65 each day for the next 19 years. Although most private sector Boomers will work well into their 70s, public employees will be lining up for their pensions. National research puts unfunded liabilities of locally administered pension funds at $574 billion (Atlantic.com 9/28/2012). It is currently estimated that 20 percent of every tax revenue dollar goes toward pensions. That figure could more than double if the current trend continues. Finally, all we need is another thing to worry about: Basel III ��� the new federal regulations on banks. Regulations requiring huge investments in programs and personnel to meet reporting requirements ��� regulations so involved that the burden may crush many local banks. Banks will be required to maintain higher levels of capital and a higher share of liquid capital, shrinking the amount of cash available for lending and reducing the ROI for investors of banks. Captive finance outlets will need to look at more deals and be willing to accept lower-quality credit applicants if they wish to maintain equipment market share, not just finance share. n Western Canada Saskatchewan and Alberta Continue Steady Growth Garry Frelick AED Vice President & Regional Director President, Douglas Lake Equipment, Surrey, British Columbia The U.S. outcome of the fiscal cliff definitely has a trickledown effect on the well-being of the Canadian economy moving forward, and the uncertainty has many of us feeling uneasy. The overall concern of the global economy and its economic impact on Canada seems to change daily, and the Bank of Canada is not likely to increase record low interest rates anytime soon given the situation in Europe and until the U.S. economy improves. The federal government still has plans to eliminate the $26 billion deficit by the next election in 2015 and return back to a surplus position by 2016-2017, which is one year later than originally planned. In a fall economic review, the government reported that sinking federal revenues will drive the 2012-2013 deficit nearly $7 billion higher than projected in the March budget. Problem areas continue to be softening commodity (continued on next page) January 2013 | Construction Equipment Distribution | www.cedmag.com | 53 42_Directors_Reports_Feature_KP.indd 53 12/21/12 1:38 PM