Issue link: http://read.dmtmag.com/i/255289
48 | www.cedmag.com | Construction Equipment Distribution | February 2014 Regions ("Three's a Charm: Infrastructure, Energy, Housing Put the Rev in Revenue" continued from page 47) Eastern Canada Pipeline Will Be a Growth Sector for a Few Years RICK VAN EXAN AED Vice President and Regional Director Vice President, Marketing, Toromont After a subpar 1.7 percent pace in 2013, real GDP growth is expected to improve to 2.3 percent in 2014 and 2.4 percent in 2015, as an accelerat- ing U.S. economy helps lift exports. In the meantime, inflation in Canada has been softer than expected, and interest rates are unlikely to rise until the second half of 2015. The Canadian dollar is expected to fall below 90 U.S. cents in 2015. The projection of a slower increase in inter- est rates provides more momentum to consumer spending over the forecast horizon, and a weaker dollar should lend a hand to exporters. However, the outlook is not without challenges. But a stronger U.S. economic growth this year should help pull Canada's export sector out of its slump. Lackluster prospects for commodity prices are weighing on investment in the resource sector, and exporters continue to face serious competi- tive challenges, all of which will lean against the expected upswing in these components. The bottom line is that Canada's economic growth should gain momentum over the next couple of years, although it will trail the U.S. performance. Against this economic backdrop, the outlook for the construction equip- ment business in eastern Canada is on the positive side. Investment in infra- structure is recognized as critical to future economic growth and both the federal and the provincial governments remain committed to directing money to this segment. Industry deliveries for 2013 are almost spot-on the numbers for 2012 and are likely to remain at this level through next year. Hydroelectric projects in Manitoba and in Labrador are helping to offset some of the quietness in the resource sector. Residential housing remains stable, agriculture is strong, and LRT projects are underway in a few of our cities. Pipeline activity will be an area of growth over the next few years with the probability of a new west-east line to move Alberta crude to the Atlantic region for export to Europe. Balancing inventory, managing receivables, attracting technicians, dealing with new computer systems, minimizing margin erosion and expense creep are the daily challenges of a construction equipment distribu- tor. Game on for 2014. Overall, equipment sales activity within the forestry market segment remains steady, especially if the U.S. housing recovery continues to gain strength, thus increasing North American lumber and building materials demand and prices. This is making up for the recent softening in housing demand in Canada. Equip- ment demand in the mining sector has definitely softened, as oil sands, commodity-sector development plans, and capital expenditures are still being scrutinized or postponed, which is having a negative impact on large equipment purchases. This trend should continue into 2014. Product support and rental revenue growth was a bright spot in 2013, and this trend, too, should continue. Western Canadian pipeline projects, including the Northern Gateway, Keystone and LNG site development, all continue to be hot topics of discus- sion in the region, and the approval progress continues at a very slow pace due to the regulatory review process. "Wait until next year" seems to be the theme again as we look forward toward 2014, and while 2013, by all accounts, was a reasonable year based on market growth, the region continues to look forward with a mood of cautious optimism as we enter the year ahead. This is my last regional report as a member of the AED Board of Direc- tors, and I have thoroughly enjoyed my four years as a member of the AED Executive Committee and board of directors. We have experienced some very interesting times during my tenure, and we are fortunate to have a very strong team of dedicated profes- sionals on the Board. I look forward to the future direction of AED, and I personally thank you for the opportu- nity to serve.