Economics & Research Blog
Capital Investment Patterns Change Significantly Over Last Decade
The 2009 Annual Survey of Capital Expenditures was recently released by the Commerce Department.
By Dr. Joe Webb
Published: March 11, 2011
- Printers are always looking for used equipment. Capital is scarce in the industry, and equipment that matches their operations, and is proven to operate well, is usually the first type of equipment sought.
- The fact that used equipment is sought before seeking new equipment is a reflection of the pure competition nature of the printing marketplace: undifferentiated goods are produced using undifferentiated equipment. In that case, used equipment is not used to support new markets or products, but to support existing operations.
- The used equipment market is necessary for the industry to reallocate its capital to businesses that can use the equipment in better fashion. Many presses were returned early off their leases in the 2002-2003 range; that relatively young used equipment allowed healthier companies to change the nature of their capacity and operations at lower cost.
- Used equipment sales always increase during business slowdowns, not as a result of the financial health of the buyer, but as a result of the financial sickness of the sellers. Prior owners of the purchased equipment bought equipment they did not need or did not have the financial means to support. Many have claimed that easy leases and generous credit approvals for new equipment have been serious problems, depressing the market prices for printed goods. That's not an accurate conclusion, but selling equipment to businesses that require easy credit in one year creates used equipment three or five years later.
- Strong companies make wise used equipment purchasers. This frustrates capital equipment suppliers and their salespeople. In years past, used equipment would find homes in Asia, Africa, and Latin America; not anymore. Those economies are stronger, and have become buyers of the latest technologies, and less of a market for out-of-date technology.