ARA forecasts record revenues yet slower growth

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 forecasts equipment rental revenue will reach $55.5 billion in the US in 2020. The forecast, updated at the end of October, states industry revenue will increase 4.3% in 2016 to a record $47.3 billion and another 3.4% in 2017 to reach $49 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 US gross domestic product (GDP),” said 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 US in 2017, of which there is a 20% 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,” said McClelland.

The results of the US elections could have an impact, said IHS Markit, the economic forecasting company that compiles data for the ARA Rental Market Monitor, but it believes the most likely outcome is that the above figures will be the same whatever the result.

Scott Hazelton, managing director, IHS Markit, said 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 US 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.” said Hazelton.