Equipment Distributors Call for Help

Washington, D.C. – Data released in late April by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) underscore the need for Congress to act quickly to adopt economic stimulus legislation to encourage new business capital investment, according to the Associated Equipment Distributors (AED). (AED is an association of independent distributors, manufacturers, and other organizations involved in the distribution of construction equipment and related products and services in North America and throughout the world.)

According to BEA’s First Quarter 2003 Gross Domestic Product (GDP) Advance Estimates, gross private investment in equipment and software fell by 4.4 percent in the first three months of this year. This drop represents the biggest decline since the fourth quarter of 2001 and the first quarterly decline in new business investment since Congress enacted economic stimulus legislation containing a 30-percent depreciation bonus last March.

According to the press release accompanying the BEA data, the poor showing in the area of equipment and software investment was one of the key negative contributors holding back growth of U.S. real GDP in the first quarter of 2003. BEA reported that GDP grew at an annual rate of 1.6 percent during that period.

“The news from the government about business purchasing leaves little doubt that Congress must act quickly to give the economy a shot in the arm,” noted AED President Tom Wilson. “Enacting a stimulus bill that encourages capital investment – whether by expanding last year’s depreciation bonus, increasing expensing levels, or bringing back the investment tax credit – is just what we need to get things going again. Encouraging businesses to buy new equipment will improve worker efficiency and workplace safety, it will spur manufacturing activity, and it will get people back to work.”

“We believe that the enactment of the 30-percent depreciation bonus last spring as part of the economic stimulus bill has encouraged some new equipment purchases over the past year,” explained Christian Klein, AED’s Washington Counsel. “People aren't buying equipment just because of the depreciation bonus, but it does seem to help nudge fence sitters. Savvy contractors have found the new law to be a very helpful tax planning tool and some of our members did report a big up-tick in equipment sales in December. AED is urging Congress to include additional capital investment incentives, such as an increase in small business expensing levels, in this year's stimulus bill.”

AED clearly supports many of the President’s current economic proposals. “The other parts of President Bush’s economic growth and job creation proposal are also critical,” Wilson added. “Accelerating marginal tax rate reductions would put cash in the hands of families and small business owners. And eliminating the double taxation of corporate dividends would help encourage new capital formation. With the war in Iraq behind us, it’s critical we now unleash the untapped potential of the U.S. economy.”

“The economic downturn has certainly had an effect on the equipment industry,” Klein agreed. “Many parts of the country have seen a substantial drop in the commercial construction market. The weak economy has also hurt state budgets, which has hurt highway and other infrastructure construction. Trepidation about the future has led many to put off new equipment purchases. That said, the strength of the residential construction market in many parts of the country has buoyed things a bit.”

The author is Editor/Publisher of Lawn & Landscape magazine and can be reached at bwest@lawnandlandscape.com.