June 15, 2011 - In the last two and a half years, the market for surplus machinery and equipment has been challenging, to say the least.  Industries that track with the overall health of the economy struggled early in the recession, enjoyed an upturn in the second half of 2010, and are now wondering what to expect next.

IMG_0142

 The "rollercoaster" can be paralleled directly to the state of the US Gross Domestic Product (GDP), a crucial measure of economic performance.  In the fourth quarter of 2008, the GDP shrank at an annual rate of 6.3%.  Similarly, the first two quarters of 2009 showed decreases of 6.4% and .07% respectively.  These declines - caused by the contraction in consumer spending, business investment and trade activity - were the largest in a quarter century.  With an increase in the volume of used equipment available in the market, resale values declined in many instances.

 The third and fourth quarters of 2009 showed modest increases of 2.2% and 5.6% respectively.  The figures for 2010 indicated annual rate increases of 3.7%, 1.7%, 2.6%, 3.1% (Q1-Q4), demonstrating that things appeared to be improving slowly.  During this time, equipment dealers enjoyed a strong run.  But with economic indicators pointing toward another slow-down, prices are likely to further destabilize. 

IMG_0168

Another metric that correlates directly to consumer spending and thus demand for manufacturing equipment are employment rates and housing sales.  Currently, unemployment remains stagnant at just under 9% and housing values continue to drop, averaging 2002 levels nationally.  There was a brief reprieve in sales for single family homes last year, but was likely caused by the government rebate program which has since expired.  While no one has officially said we are on the way to a double-dip recession, the writing is on the wall.

Despite the discouraging economic forecast, there does appear to be some good news in the machinery and equipment market; used equipment dealers have somewhat depleted their inventories and are still in a buying mode.  How long this lasts, however, is subject to the economic conditions going forward into the summer and fall of 2011.

Based in Buffalo NY, Blackbird Asset Services is a boutique auction and valuation firm that caters to secured creditors and bankruptcy professionals. With a national practice, our auctioneers and appraisers work all over North America and conduct USPAP certified appraisal reports as well as on site and online auction sales.