ARA expects solid Q3 revenue growth

The America Rental Association (ARA) reported that the outlook for equipment rental revenue, comprised of the construction/industrial and general tool segments, remains positive for 2021 and beyond. 

The updated third quarter forecast, released at the ARA Show in Las Vegas, calls for equipment rental revenue to exceed $47.6 billion in 2021, a 3% increase over 2020. 

While that number is slightly less than the second quarter forecast, 2022 revenue now is expected to grow 9.9% to reach $52.4 billion. This would be a record for the equipment rental industry, topping the $50.9 billion recorded in 2019, the ARA said.

The latest ARA forecast also calls for equipment revenue increases of 5.5% in 2023, 2.5% in 2024 and 3.3%t in 2025 to reach $58.6 billion.

Construction equipment rental revenue leads the way with a 12.3% increase expected in 2022 to reach $38.7 billion while the general tool segment is forecast to grow 3.7% in 2022 to $13.66 billion.

The forecast does not include the possible positive impact should Congress pass the Infrastructure Investment and Jobs Act of 2021 (IIJA).

Scott Hazelton, director, economics and country risk at IHS Markit based Andover, Mass., said that as long as the timing of the infrastructure spending remains unclear, it makes it difficult to assess the rental forecast implications over time. 

But IHS Markit, which provides data and analysis to the ARA, expects infrastructure spending to have a positive impact on future rental revenue forecast updates.

“While there is uncertainty in Washington, D.C., about when the bipartisan infrastructure bill will pass, many Washington insiders believe it is only a matter of time,”  said John McClelland, ARA vice president for government affairs and chief economist. “However, most of the benefits of increased infrastructure spending will not occur in 2022 because it takes time for projects to be approved and funding obligated.”

For now, Hazelton noted that the outlook this quarter remains positive because the forecast for nonresidential construction has been steady and the American Institute of Architects billings index has moved into positive territory.

“When that index indicates expansion for three consecutive months, there is a high likelihood that nonresidential construction will pick up 12 to 18 months later,” Hazelton explained. “While this only moves the nonresidential forecast from roughly flat to modest growth, it is enough to move rental equipment demand up.”