The second quarter of the year saw very little overall change in business sentiment in Europe’s equipment rental industry, with still no clear trend emerging following last year’s Eurozone concerns.
The Nordic region and the UK are the most optimistic current markets and are also reporting the most favourable conditions, while overall investment plans show a modest hardening of views, with slightly fewer companies planning significant increases in investment this year and next.
The balance of opinion on business conditions at the end of June was zero, which means that the same proportions of respondents (22.9%) were reporting improvements and deteriorations in conditions. The majority, 54.3%, reported no change.
That actually represents a small improvement over the first quarter, when there was a -7.2% balance, and comfort should also be taken in the fact that it is the first quarter since the start of 2012 where there was not a negative balance of opinion.
The RentalTracker survey, which is a joint venture between IRN and the European Rental Association, was conducted at the end of June and generated around 200 responses. The full version of the survey report will appear in the July-August issue of IRN.
Regarding activities levels in the second quarter of the year, there is almost no change from the first quarter, with a very small positive balance of opinion. This measure has remained more or less constant for the past four quarters.
However, look at the same figures comparing activity levels for the first half of the year and you gain a generalised picture of declining increases in activity. The first half of 2011 saw more than half of respondents reporting year-on-year revenue increases, and that fell to 40.6% last year and is now at 33%.
This reflects a much flatter growth curve for Europe’s rental sector after the dramatic year-on –year improvements seen in 2011, when the market was recovering from depresse4d levels. The ERA is expecting just 1.0% growth in revenues across Europe this year, and the Rental Tracker survey reflects that.
In terms of optimism, although there is still a healthy positive balance of opinion - +30% - it has fallen back from 36% three months ago. The encouraging feature here is that very few companies – less than 15% - are expecting conditions to be worse in a year’s time, with the rest split evenly between those expecting improvements and those anticipating no change.
The continued rather sluggish outlook is confirmed in the figures for employment intentions. Just 19.5% of survey respondents will expand their workforces in the next quarter, which is a significant fall from the 27% of the first quarter. The vast majority of rental companies will not change their employee numbers, and the proportion that will make job cuts – 10.9% - has remained pretty much at that level for the past two years.
Intentions in capital investment in fleet have not changed greatly since the first quarter: 22% said they would increase spending by more than 10% this year – a relatively modest amount and slightly lower than the 31% from the first quarter – while the same slight hardening of opinion was evident for spending plans next year, with a third of all companies expecting to increase investment by more than 10% compared to 39% three months ago.
It seems that rental companies generally are expecting no great help from Europe’s economy next year, and are slightly trimming investment plans as a result.
The time utilisation trend again enjoyed a positive balance of opinion, up from +5.1% last quarter to +11.4% now. Around 36% said utilisation was improving, perhaps reflecting a positive change following the weather-impacted first quarter.
Regionally, the notable features are confidence in the UK and Nordic region – these two occupy the top two positions in all but one of the regional graphs.
Multinational companies are also more positive, with quarter on quarter improvements in almost all the measures. Significantly for equipment manufacturers, they have also improved their investment plans compared to the first quarter – this bucks the overall trend, but is definitely better news for the equipment suppliers.
Elsewhere, the Spanish and Italian markets – and to some degree the Benelux as well - remain in a less-than-joyous mood. In Germany, there is little optimism for a year ahead (none were expecting ‘much better’ conditions), and German renters were also the least likely to report year-on-year growth in second quarter revenues. They are conservative for investment this year, but much more positive for spending next year.
French rental companies report slight improvements in utilisation, business levels and employment intentions, but they have slowed their investment plans, particularly for next year, with 29% expecting to increase spending by more than 10%, which compares to 42% at the end of March.