Introduction
The heavy construction equipment industry is facing an interesting and unpredictable phase. In the first quarter, the rental market was thriving, and demand for various equipment was pretty high. It was assumed that the demand for heavy equipment would increase over time. However, in the current situation, the results show something else, the decrease in the rental market.
There could be a various reason for fluctuation in the market, it behaves like a roller coaster sometimes high and sometimes low. It is the dynamics of the equipment market. The recent situation was updated by the American Rental Association (ARA), which updated the industry forecast, particularly this month. Also, according to the updated result, what will be the situation of the equipment rental market next year?
Current revenue situation
According to the current statistics of the equipment rental market, it is hard to predict the next year’s market position. Particularly, this month US revenue witnessed slow projections. The American Rental Association notices the recent market inclinations show that in the U.S. rental industry growth forecasts are softening.
The ARA, representing equipment rental segments across the continent, updated its 2024 forecast, predicting an 8.9% revenue increase to US$78.7 billion for construction and tool rentals.
The results show a decrease as compared to the last quarter specifically in the rental segment the last quarter’s projection of approximately was 9.7% increase totaling 79.2 billion, as updated by the American Rental Association. In the above stats, we can clearly see the difference and decrease in the rental market.
Considering current trends and interest rates in the U.S., third-quarter data indicates a slowdown in growth for rental construction machinery. Although this year saw a tremendous rise that was also record-breaking and went up to $51.4 billion in May setting this market 8.4% above the year-over-year level.
Market optimism grows with rising rental revenues
Most of the heavy construction equipment manufacturers are optimistic about the last quarter of the year. Also, according to them, the construction and industrial rental revenue is growing again and bringing in more than $60 billion.
“Largely what we’re seeing is softening growth as well. We’re seeing pricing elasticity”. Said Kurt Barney, president, Vandalia Rental in Ohio, US.
Vandalia Rental President Barney stated that the US rental market is booming again and it receive some relief in the next few months. The market is experiencing vibrancy and fluctuation, as the U.S. Federal Reserve is expected to announce its first reduction in bank borrowing interest rates since March 2020.
Statement of Jerome Powell
On 23 August, Federal Reserve Chair Jerome Powell said “the time has come” for the central bank to adjust its monetary policy, signaling that rate cuts could soon lower borrowing costs for American consumers and businesses.
He further added “We are managing rate pressures, supply chain, and mix of the fleet in a softening environment in particular in the earthmoving segment. He also believed it was a good idea to bring some of the projects on the sidelines when interest rates began to decline.
However, there have been threats of rate cuts for over four years in the US, and Scott Hazelton, the managing director of data analytics at S&P Global, said that it was prudent to be careful approaching the end of 2024.
S&P Global does not expect the interest rates to ease until December, he said in the middle of the month, he was not aware of the works that Powell undertook on 23 August. Powell wants to have inflation under its control before movements are to be made.
This uncertain environment presents challenges for both the heavy equipment for sale and rental markets as they navigate these shifting dynamics.
Rental market conditions in Canada
In Canada, the equipment rental market situation is also similar, the revenue is a little low as a growth percentage but it is expected that the region will perform much better than the year figure.
The latest prediction of the American Rental Association revealed an overall Canadian equipment rental revenue of $5.75 billion, an increase of 6.6%, a slight downgrade from the previous figure of 7.2% for $5.79 billion for the last quarter,” according to the ARA. It is estimated that Canadian general tool revenue this year will be 6.8%, $1.08 billion, while Canadian equipment industry revenue in 2024 is expected to be $4.67 billion.
ARA still positive on 2025 North American rental outlook
The recent situation of the rental equipment market is complex and unpredictable, the construction forecast has not changed much since last quarter. Possibly there is a slight chance of a sudden boom in the market and an increase in the rental equipment demand, but there has been much change in general. The market is going well but as compared to previous stats it’s becoming slow or decreasing its marginality. Next year’s GDP growth is lower than the trend at 1.6% growth; the trend is around 2.1%.
There’s still uncertainty but the overall view of rental is positive moving forward, but there is uncertainty out there. According to Barney the US market, even a modest rate reduction this year and into next could have a huge impact on rental.
Conclusion
The heavy construction equipment rental market is facing an unpredictable phase, with fluctuating demand and slow growth in recent months. While the U.S. market saw record highs earlier in the year, the growth rate has since softened, and projections for 2024 show a slight decline compared to previous forecasts.
Apart from the US market some other regions such as Canada are also experiencing similar trends, though with slightly better growth prospects. Despite these challenges, industry leaders remain cautiously optimistic about a potential rebound in the coming months. Especially if interest rates are reduced. However, uncertainty remains, and the market will continue to experience unpredictability as it navigates these dynamic conditions.
