Short war could boost economy in the short term

News AED April 01, 2003
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Directors of the Associated Equipment Distributors (AED) believe the length of war in Iraq will have significant impact on the

Directors of the Associated Equipment Distributors (AED) believe the length of war in Iraq will have significant impact on the "when" of economic recovery.


Commenting on business conditions in their respective regions, which include several states, directors said a short war could bring about a quick recovery for the construction machinery business, but a long one may keep the economy in hibernation.


The war, however, is not the only factor affecting business.


Jim Price of Valley Supply & Equipment Co., Funkstown, Md., believes that a "quick and decisive" war will give the economy a short-term boost, but added that there are serious economic problems that even an imminent military victory might not fix immediately.


His concerns were reiterated by others who worry about the budget crisis in the states within their regions. For example, equipment dealers in New York and New Jersey, states facing multi-billion-dollar deficits, worry that state-funded construction projects are being postponed or delayed indefinitely.


There's a similar picture in the northern Midwest, where AED Director Mike Sill of Road Machinery & Supply Co. reported that budget cutting in Minnesota "is impacting every corner of state spending . . . and the impact on our roads is yet to be determined."


But despite all their concerns, AED directors are encouraged by the following factors:


* Continued low interest rates are encouraging profitable contractors and other customers to buy equipment;


* Brutal winter weather in many parts of the U.S. only delayed construction projects that will commence in the spring months;


* The very start of the war in Iraq eliminated months of apprehension that kept many customers from buying and renting equipment;


* Used equipment values have stabilized in some, but not all, parts of the country;


* The product support side of the equipment business continues to be solid as equipment users reinvest in maintenance of existing fleets; and


* Rental fleet utilization.


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