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Rermag 7611 Rothheadshotpngcropdisplaypngcropdisplay 1
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Rermag 7611 Rothheadshotpngcropdisplaypngcropdisplay 1
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A Few Ways of Looking at 2016

Jan. 1, 2016
As we begin a new year, every company has its expectations, budgets and projections, and in the rental business, a lot has to do with how the economy will perform.

Welcome to 2016! Hopefully most of you had a bit of time to reflect during the holidays and had at least a few days off if not more. As we begin a new year, every company has its expectations, budgets and projections, and in the rental business, a lot has to do with how the economy will perform. I’m sure most of you have a pretty good sense of what the year ahead will bring, and have spoken with your customers and looked at some economic projections to help you plan your strategy. 

We offer a contribution to this effort by interviewing three top economists in this issue and I hope you’ll take a bit of time to read their thoughts on the economy in the year ahead. All three focus most of their attention on the world of construction; it’s not just a minor segment of interest to them. 

Ed Sullivan, executive vice president and chief economist for the Portland Cement Association, has worked as an economist for, among others, Chase Manhattan Bank Economics, Standard & Poor’s, Wharton Economics, the CIA and Sen. Ted Kennedy. (And for the older crowd, no, he never hosted a variety show!) Ken Simonson, chief economist for Association of General Contractors since 2001, has been an economic advisor in the U.S. Small Business Administration’s Office of Advocacy, vice president and chief economist for the American Trucking Association, and worked for the President’s Commission on Industrial Competitiveness, and more. Mig Dobre, senior analyst at Robert W. Baird & Co. has been covering machinery and construction for a couple of decades as well. 

They all pretty well agree that we’re on the up escalator and that it should be a good year ahead in nonresidential and residential construction, although they have differing views of what rung on the escalator we’re on. Are we at a relatively early phase with a long period of growth ahead or are we getting close to the jumping off point? Read Sullivan and Dobre especially for their thoughts on this question. 

A lot of experts in the oil-and-gas field carefully studied when oil prices are going to come back and most agree it won’t be too soon. So those of you dependent on a lot of upstream activity might need to re-examine how you’re going to make your living in the short term. Obviously this is an issue you’re already well aware of. The fact that some larger rental companies that have the ability to do so have moved a lot of inventory away from these upstream situations and thus created some downward pressure on rates elsewhere is a dynamic that could cause complications in the marketplace as well. 

There’s new legislation to finance infrastructure funding for the next five years. Considering lawmakers have been patching highway funding together on a year-by-year basis and never providing enough, that’s a good thing. But, comparing what the bill offers and what the nation needs is a bit like a football game I was watching this past weekend. One team was down by three touchdowns late in the third quarter and after scoring one in response, some of the players celebrated as though they’d just won the Super Bowl. The bill is a good thing but it doesn’t come close to addressing our needs considering, as Sullivan says, there will be 50 million new drivers on the road in 25 years. So hold off on the end-zone dances and keep on lobbying on behalf of these important infrastructure issues! 

Dobre, as an analyst for Baird, has his finger on the pulse on how the investment community views the rental industry, so don’t miss his comments. He points out that if the winter is a mild one and construction projects get off to a strong start that could have a positive impact on how investors think about the rental market for the coming year. The effect of that would not be limited to the stock prices of publicly traded companies, but could impact smaller rental companies looking for loans to buy inventory, or property for a new building or many different investments that require capital. That doesn’t mean your plans will be ruined by a couple of snowstorms in January, so don’t get discouraged. It’s just good to understand different angles and opinions. 

I wish everybody a Happy New Year and very much look forward to seeing you at the upcoming shows.