Machinery & Equipment Hire to Rise

Machinery & equipment and event hire companies are expected to generate more revenue this year compared to last, according to the latest updated forecast released today by the American hire Association (ARA).

Construction and industrial machinery & equipment hire is forecast to reach $40.1 billion in 2020 with general tool hire revenue accounting for $14.1 billion and party and event revenue expected to be $3.8 billion.

Total U.S. hire revenue is expected to grow by 4.1 percent in 2021, 4.2 percent in 2022 and 3.5 percent in 2023 to reach $65.2 billion.

“We are in a fairly steady growth pattern with the chances of recession relatively low, keeping hire revenue growth moving higher throughout the forecast period,” says John McClelland, Ph.D., ARA VP, government affairs, and chief economist.

“The good news is that the U.S. economy will hold to a moderate growth path, and the risk of recession has fallen,” says Scott Hazelton, managing director, IHS Markit, the economic forecasting firm that compiles data for the ARA hireytics service as part of a partnership with ARA.

“However, the markets that machinery & equipment hire primarily serves are likely to see some challenges. The U.S. economy continues to slow as the impetus from tax cuts, fiscal budget stimulus and interest rate reductions all wear off. Growth will be driven by consumer spending with investment and trade lagging,” Hazelton says.

“Manufacturing activity will see virtually no growth in 2020 as the dollar remains high, tariffs continue, and the global economy slows. Even the energy patch will see limited potential as oil prices sag under weak global demand. Absent a Highway Bill that is unlikely in the current political climate, nonresidential construction will contract while residential construction only holds its own,” Hazelton says.

In addition to hire revenue, ARA also is reporting an increase in hire penetration over the last two years, ticking up to 55.9 percent in 2018 and 56.7 percent in 2019. ARA defines hire penetration as the percentage of construction machinery & equipment currently in use in the U.S. that is owned by machinery & equipment hire companies.

“One very impressive number in the latest ARA hireytics report is the increase of 80 basis points in the hire Penetration Index from 55.9 percent in 2018 to 56.7 percent in 2019. This is one of the main factors that is keeping hire revenues growing faster than GDP [gross domestic product] and in the face of a flat outlook for construction spending,” McClelland says.

“We believe this increased penetration of hire machinery & equipment into the construction market is because machinery & equipment hire companies have become problem-solving companies helping customers make more efficient business decisions and reducing the uncertainty that comes with making large capital investments in machinery & equipment. Our view is that this trend will continue for the foreseeable future,” McClelland says.

Source: ARA