New Year, new confidence
11 January 2016
There were encouraging signs in the ERA/IRN RentalTracker survey covering the last three months of 2015, and looking ahead to 2016. This confidence came after the sense of stability that was the main message from the third quarter survey, and could point to a brighter trend for the industry after a volatile 12 months.
The ERA/IRN RentalTracker survey takes place every quarter and is jointly organised by IRN and the European Rental Association, and sponsored by Perkins. There were nearly 100 respondents to the fourth quarter/full-year questionnaire.
The amount of money rental companies are planning to invest in their fleets is a key indicator of confidence in the market, and the fourth quarter/full-year survey results showed further positivity, building on the momentum of the third quarter questionnaire.
Throughout Europe, 38% of respondents said they planned to increase capital expenditure in their fleets by 10% or more in 2016, up from 33% in the last survey, with German respondents leading the charge at 74% (up from 60% in the last survey), followed by respondents from Spain, Benelux and the Nordic region – all of which came in above the European total.
And the majority – 48% of respondents – said they planned to maintain the same investment levels this year, up from 44% in the third quarter survey, and just 14% of respondents said they planned to reduce fleet investment in 2016.
The balance of opinion on investment intentions (the difference in the percentage of respondents seeing positive and negative trends) also increased quarter-on-quarter, at +23.5%, from +14% in the last quarter.
However, capital expenditure plans in the UK – one of the largest rental markets in Europe – appeared to falter compared to the third quarter survey, with 20% of respondents from this region expecting to increase investment by at least 10% this year, down from 47% in the last survey. Nevertheless, the majority (60%) of respondents from the UK said they planned to maintain the same level of expenditure year-on-year, which is still an encouraging sign.
Sentiment had also improved when respondents were asked about their forecasts for the business environment in a year’s time. In fact, 56% of respondents to the overall survey said they expected business conditions to be ‘better’ or ‘much better’ in 12 months’ time, an improvement compared to 48% in the last survey.
Respondents from the Benelux, the UK, Italy, Germany and the Nordic region as well as multinational companies were the most confident, coming in above the European total. In fact, just 8.6% of respondents predicted business conditions to be worse a year down the line.
However, slightly more mixed indications came from the employment intentions question, which asked whether respondents planned to employ more staff in the first quarter of 2016.
In total, 30% of respondents said they’d employ more in the first three months of this year, down slightly on the total of 32% responding to the same question in the third quarter survey, which looked ahead to the final quarter of 2015.
This said, the employment question still resulted in a positive balance of +21%, compared to the balance of opinion of +16% in the last survey, so there was a marked improvement in positive sentiment at least.
Nevertheless, respondents from Italy, the Nordic region, Benelux and France were the least optimistic on this question, with just 14% of respondents from France expecting to employ more people in the first quarter.
The fourth quarter
After a bumpy year, 2015 ended on a positive note, according to the ERA/IRN RentalTracker. Looking at the results for the last three months of 2015 revealed improvements in sentiment compared to the third quarter survey when it came to the question of current business conditions, which resulted in a positive balance of +33% – a jump compared to the balance of opinion of +15% seen in the last survey.
And the percentage of respondents reporting year-on-year growth in the fourth quarter also increased to 54% across Europe, compared to 34% in the third quarter survey.
The question of utilisation also showed positive movement, with 51% of respondents across Europe reporting increasing utilisation, compared to 39% in the last survey.
German respondents came in above the European total in terms of confidence in all survey questions except one, while strong survey results were also reported in general from the UK/Ireland and Multinational companies.
In fact, there were very few regions for which sentiment significantly worsened compared to the last survey. However, France – one of Europe’s largest rental markets – remains in the doldrums somewhat, together with Spain and Italy, which tended to rank below the European total in fourth quarter/full-year survey questions.
Nevertheless, 32% of French respondents reported growth in the fourth quarter compared to the same period in 2014, and while this was the lowest percentage in terms of responses to this survey question, it was a marked improvement compared to the 14% of French respondents reporting year-on-year growth in the third quarter survey.
Again, on face value, the balance of opinion of +5% of French respondents reporting positive business conditions at the end of the fourth quarter doesn’t look good, but it is at least far better than the negative balance of -8% reported for the same question in the last survey.
And this trend is repeated throughout this quarter’s RentalTracker – while France ranks low in the overall results, the details show that sentiment here did actually improve quarter-on-quarter, just not as much as everywhere else.
So all in all it has been a positive end to 2015, and sentiment points to renewed confidence heading into the first quarter of the new year and beyond. And this ties in with the latest forecasts from the ERA, which expects Europe’s equipment rental market to grow 2.7% next year, representing a significant increase on the sub-2% growth rates of 2014 and 2015.
It will be very interesting to see if this momentum continues to build in the first quarter ERA/IRN RentalTracker survey, scheduled to be published in the April/May issue.
See the January/February issue of IRN for the full analysis of the fourth quarter/full-year survey, with extra graphs and tables.