Searching for stability

Confidence appears to have faltered among respondents to the ERA/IRN RentalTracker for the three months to the end of September, with key indicators such as sentiment about business conditions, investment and employment intentions slipping compared to the second quarter.

This dip could reflect a slow July and August for the industry, combined with political uncertainty and the slow-down in developing markets, particularly China, causing concern.

The ERA/IRN RentalTracker survey takes place every quarter and is jointly organised by IRN and the European Rental Association, and sponsored by Perkins. With over 100 respondents to the third quarter questionnaire, there was lots of data to analyse, and getting stuck into the details is the key to understanding the trends in this sector.

It is clear that the balance of opinion (the difference in the percentage of respondents seeing positive and negative trends) on business conditions has taken a hit, slipping to its lowest point so far this year. The balance for Europe as a whole fell slightly to +15%, compared to +18% in the last quarter, with the main drop seen from Italian respondents, where the balance stood at -9%.

However, drilling down into the details reveals an interesting dynamic. Take Italy, for instance, where despite the disappointing overall balance of opinion, the majority of respondents (61%) actually reported stable business conditions at the end of the third quarter.

This goes to show that while analysing the balance of opinion can be useful in terms of getting overall view of whether sentiment has improved or deteriorated, this can mask what the majority of respondents actually think – that conditions have remained the same.

Investment

Fleet investment is another key way of assessing the health of the rental industry, and the results of the third quarter survey also revealed a mixed picture. There was a sharp fall in the overall balance of opinion to the question of capital expenditure this year compared to last year, with a balance of +7% for this survey, compared to +31% for the second quarter survey.

That suggests that some companies have trimmed their spending plans for the second half of this year. Once again, however, the proportion responding that investment remained stable increased, from 36% in the last survey to 41% in this survey.

However, the percentage of respondents expecting to increase investment by at least 10% this year fell to 33% from 48% in the last survey, with French respondents proving the most pessimistic, and German respondents the most bullish. Respondents representing multinational companies produced a similar result to last quarter, with 38% stating that they intended to increase investment by at least 10% this year, compared to 39% in the last survey.

So while many respondent s to the ERA/IRN RentalTracker still felt hat investment levels were stable in the third quarter, the big spenders appear to be tightening their belts somewhat.

Utilisation figures also showed an overall drop. Across Europe, 39% of respondents reported increasing utilisation at the end of the third quarter, compared to 64% for the survey covering the second quarter of this year. The most dramatic fall was recorded in Italy, where just 22% of respondents reported increasing utilisation, compared to 77% in the last survey.

There was a similar picture when it came to employment intentions, where 31% of all respondents said they intended to employ more people in the fourth quarter of 2015, a reduction of 10% compared to the last survey.

Nevertheless, the overall picture is one of a slow-but-steady building of confidence when comparing the survey data year-on-year. Contrasting the end of the third quarter this year with the same period in 2014 revealed that 34% of all European respondents felt that business conditions were improving, against 39% last year and 43% in the first quarter of this year. While this may seem like deterioration, the overall balance of opinion for the current survey stood at +16%, up from +6.3% at the same point last year.

Forecasts


Looking ahead, the percentage of respondents forecasting business to be ‘better’ or ‘much better’ in 12 months’ time at the end of the third quarter next year stood at 48%, up from 42% for the last survey. Leading the rally was the Benelux region, where 77% of respondents felt that business improvements would improve a year down the line, up from an already strong 67% in the last survey.

This quarter’s ERA/IRN RentalTracker results have certainly proven to be a mixed bag, with headline figures showing dampened spirits. As ever, the devil is in the detail, and the fact that respondents generally feel that business conditions were relatively stable in the third quarter, and are more confident that things set to improve in 12 months’ time, are the key take-home messages.

This is an abridged version of the full ERA/IRN RentalTracker article, which will appear in full with extra analysis and data in the November/December issue of International Rental News. To subscribe to the magazine, go to http://www.khl.com/subscriptions/magazines/international-rental-news/