Are you ready for the turnaround?

Although economic forecasters predicted that Canada would not be as hard hit as the U.S., the downturn in the economy looks like it will get worse before it gets better.

Last year, the federal government said that the country was in better shape than others to weather the global economic storm and we would bounce back quickly, but consumer confidence in December shrank to the lowest level since 1981-82, when the jobless rate reached 13 per cent.

In January economists from the big banks warned Canadians to brace themselves for another year of weak growth as the troubles in the weakening US economy continue to spill over. In other words, this slump will last longer than originally expected.

Many rental operators I have spoken with were prepared for this. They saw it coming when the sub-prime market in the U.S. collapsed while housing starts in Canada were still on the rise, and they were ready.

Equipment rental companies can weather economic slowdowns much better than those in the manufacturing sector as the concept of renting offers construction contractors the option to restrict their capital spending when cash flow has been interrupted. However, this in itself cannot sustain rental companies for long and belts will be tightened one notch more.

While most of the talk seems to be centred on how long it will last and how those in the industry are coping with it, I haven’t heard much talk about what they will do when the economy bounces back.

Canadian Rental Association (CRA) vice-president Andrew Paquette reminded the industry during a speech at the CRA Ontario annual awards banquet that they will need to be ready for this as well. “We are faced with some tough economic times, but we have to be prepared for the turnaround because when the economy does turn it will turn real fast,” he said.

He’s right and veterans who were in this industry during the 1981-82 and 1990-92 recessions have seen this before.

In fact, the Bank of Canada’s first detailed economic analysis for 2009 predicted the economy will shrink until the middle of this year, but we will start rebounding as early as July and return to full capacity in mid-2011.

The central bank says the extraordinary monetary and fiscal stimulus being injected around the world will help rejuvenate battered economies and recoveries can come sharply. They add that Canada’s recovery will be quicker than previous recessions and stronger than recovery in other G7 countries because of the relative health of the economy, especially in Western Canada.

So while you are streamlining inventory, consolidating equipment purchases and tweaking your utilization rates, don’t forget to plan for better times ahead because they are coming. The question isn’t when, but will you be ready?

Canadian Rental Service welcomes new CRA president
If you think the only change we made to the CRA president’s message in this issue was to replace the photo and the first name of the president, you’re not keeping in touch with your association. This issue contains the first report by Jay Williams, no relation to past president Brad Williams who graced this newsletter with his words of “rental wisdom.” Jay has some wisdom to share with reader as well.