ARA downgrades growth forecast

According to the ARA, construction and general tool rental in the United States is softening, and will now see an 8.9% increase in revenue in 2024, totaling $78.7 billion and 5.3% growth in 2025.

This is a decrease from the ARA’s projection in the previous quarter that revenue would rise 9.7% this year, totaling $79.2 billion.

Broken down by segment, construction and industrial rental revenue (CIE) is projected to be $62.3 billion, while general tool hire has been readjusted to $16.4 billion.

“While the rental industry and opportunities continue to expand, we are experiencing softer growth,” said Tom Doyle, ARA vice president, program development. “The ARA quarterly survey results confirm this softening.”

Scott Hazelton, managing director at S&P Global, which is associated with the ARA, added that the forecast for construction and industrial had not changed much since last quarter, perhaps a few tenths of basis points, but there has been more change to general tool. “The market is still doing well but slowing. Next year’s GDP growth is lower than trend at 1.6% growth, the trend is around 2.1%. The overall view of rental is positive moving forward, but there is uncertainty out there.”

Kurt Barney, president of Ohio-based Vandalia Rental, confirmed the trend. “Largely what we’re seeing is softening growth as well. We’re seeing pricing elasticity. It’s no longer, ‘Do you have it?’ We’re back to doing business like 2019 when we have to really communicate the value proposition of working with us.”

Barney added that the company was balancing rate pressures, the supply chain and fleet mix in a softening environment, especially on the earthmoving side. “As interest rates begin to decline, I think it will take some of the projects off the sidelines. The quarter and half points have a huge impact on those projects. The rental model and proposition has never been stronger. It’s a good place to be.”

Canada projections 

The updated forecast for total Canadian equipment rental revenue shows a 6.6% growth totaling $5.75 billion, compared to last quarter’s projection of 7.2% growth, totaling $5.79 billion. Broken down by segment, Canadian general tool revenue this year is projected to see 6.8% growth at $1.08 billion, while Canadian construction and industrial equipent revenue in 2024 is projected to be $4.67 billion.

Rob Wilson, chief operating officer of Ontario-based Rental Services said the market is pretty slow but that Stephenson’s is still growing. “It’s a mixed bag. Residential activity represents 60% to 65% of those markets and that activity is down.”

However, Wilson is optimistic that the latter half of 2025 will be very strong.

The 2025 projection for Canada’s combined rental revenue is $6.14 billion, a 6.7% year-over-year growth. Broken down by segment it equals $1.14 billion in general tool rental revenue and $5 billion in CIE rental revenue.

“I wouldn’t characterize Canada’s economy as robust, but CIE is one of the strongest investments in particular,” said Hazelton. “We do expect the economy to get stronger as a whole by 2027.”

S&P Global believes that interest rates will not come down until December, despite the chair of the federal reserve, Jerome Powell’s, most recent testimony. Powell wants to see inflation staying under control before any moves are made. Hazelton also believes when the cuts come, they will come slowly.

“We [S&P Global] also see a downshift in GDP from 2.4% growth this year to 1.6% growth next year,” added Hazelton.