The latest five-year forecast for the equipment rental industry released by the American Rental Association (ARA) remains positive, even as several economic factors point toward more modest increases over the next five years. ARA now projects equipment U.S. rental revenue to reach $55.5 billion in 2020.
The forecast, updated at the end of October, calls for industry revenue to increase by 4.3 percent in 2016 to a record $47.3 billion and to grow another 3.4 percent in 2017 to reach $49.0 billion.
“While we are forecasting a gradual slowing in the growth of rental revenues in this quarterly update compared to our last quarter, we are still showing rental revenue growth in excess of the growth in the U.S. gross domestic product (GDP),” says John McClelland, ARA’s vice president for government affairs and chief economist.
“Our outlook for the equipment rental industry continues to be positive and our scenario analysis suggests that if a mild recession were to hit the U.S in 2017—of which there is a 20 percent chance—there would not be a significant impact on the equipment rental industry because the likely cause of such a recession would be a weakening in economic activity in Europe,” McClelland says.
The results of the U.S. elections could have an impact, but IHS Markit, the economic forecasting firm that compiles data, expects that no matter the outcome, the most likely result will be in the range of the just-released forecast. Scott Hazelton, managing director, IHS Markit, says political uncertainty, both domestically and abroad, is creating delayed recoveries in oil and commodity markets, which in turn delays investment decisions.
“The result is a somewhat slower pace of economic activity, particularly in capital goods intensive markets, such as construction and energy exploration. However, the U.S. economy remains fundamentally solid and some domestic uncertainty will dissipate after the election. The result is a modest reduction in expected rental revenue growth. However, the outlook continues to be one of growth and growth that will outpace the broader economy,” Hazelton says.