In its quarterly update, the American Rental Association significantly changed its economic forecast, particularly for construction and industrial equipment (CIE) rental revenues.
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In the previous forecast, CIE rental revenue was expected to reach $45.5 billion in 2023 and $46.7 billion in 2024. With new considerations, the CIE rental revenue is expected to total $56 billion this year and $59 billion in 2024.
There are two factors underpinning these changes, according to ARA. The first is the data on nonresidential construction spending used in the model and the second is the increasing importance of “specialty rental” to overall rental revenues.
Recent analysis by economists at the Federal Reserve Board has suggested that data for nonresidential construction spending produced by the U.S. Census Bureau has underestimated nonresidential construction spending by at least 20 percent since the second quarter of 2021.
“The Fed economists’ analysis is both well-reasoned and analytically sound and we believe that this new information needs to be included in our revised forecast,” says John McClelland, VP for government affairs and chief economist. “The second change in our forecast is the inclusion of information about specialty rentals which has been a growing trend. Recent work by our partners at S&P Global has constructed a 10-year time series of specialty rental from multiple data sources. Incorporating this new information into our model now gives specialty rentals a larger share among the variables that forecast CIE revenues.”
