Improving Economy May Lead to Higher Equipment Costs

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Photo courtesy of Mike Peel via Wikimedia Commons

First, the good news: The US economy grew 3.9% in the third quarter — from July to September — according to a report issued last month by the US Commerce Department.

That rapid growth rate comes on the heels of an even more astonishing 4.6% growth rate during Q2, from April to June. That rosy economic news, combined with a falling unemployment rate and increased hiring, indicates that the US may have fully recovered from the Great Recession of 2008  to 2014.

GDP, Productivity Up, Unemployment Down

And for the second consecutive quarter, the second revision of the US gross domestic product — the value all all the goods and services generated — was also sharply higher, according to Gus Faucher, senior economist for PNC Financial.

“The large upward revision to third quarter GDP growth was a pleasant surprise, and the US economy is growing at an above-trend pace, absorbing the slack left in the economy after the Great Recession,” Faucher said in a note to investors.  “Growth was broad-based across most segments of the economy, including consumer spending. Inventories were negative, but that bodes well for near-term growth as firms will need to restock their shelves.”

Prices Could Rise

That’s all good news. But the bad news is that all this rosy economic data could lead to higher prices, especially for heavy equipment such as forklifts, tractors and excavators.

With manufacturing and construction on the rise, so is demand for heavy construction and materials handling equipment. Over the past three years, the average price of pallet trucks and forklifts has risen about 2.5%. Related costs, including fuel, maintenance and operator training, also have increased.

Controlling Equipment Costs

As a result, some businesses seek ways to control their costs. These include converting to electric vehicles, which are cheaper to operate and maintain than gas-powered forklifts and other vehicles. The average cost of operating an electric forklift for 2,500 hours is about $500, compared to $1,500 for a gas-powered vehicle during the same time period.

Savings also can be found in fuel and fueling equipment, such as pumps. A forklift powered by liquid petroleum will consume about $5,000 worth of fuel per year.

Another way to save is to lease rather than buy equipment. If you only plan to use your forklift or other vehicles for a limited time, it’s possible to save big money by renting or leasing them rather than purchasing them outright. The average cost of renting a forklift is about $900/week, compared to the average cost of a new truck, which can be upwards of $38,000. Plus, when you rent or lease a forklift, you don’t have to worry about long-term maintenance costs.