Canadian Rental Service

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A long hangover

It is a new year, so let’s take a look ahead. Here are two reports from high-forehead types at the American Rental Association’s economic consultant, IHS Global Insights, and the CIBC’s chief economist, Avery Shenfield.


January 30, 2013
By Patrick Flannery


Topics

It is a new year, so let’s take a look ahead. Here are two reports from high-forehead types at the American Rental Association’s economic consultant, IHS Global Insights, and the CIBC’s chief economist, Avery Shenfield.


The ARA on Canada

Equipment rental industry revenues in Canada will experience steady growth over the next several years in all three market segments. While growth is expected, the outlook is more muted than in the U.S., principally because Canada experienced a milder economic recession. The breadth and depth of the downturn was relatively mild due to a large institutional structural component – school and hospital renovations, as well as infrastructure investment.

Leading the way in long-term growth, through 2016 is the construction/industrial market segment, followed by general tool and then party and event. The construction/industrial segment comprises 80 per cent of the overall equipment rental industry in Canada, compared to 66 per cent for the U.S. This is attributed to the natural resource intensive economy, which drives the demand for construction/industrial rental.

In September, Canada revised its National Income and Product accounts, largely affecting the non-residential structures segment in a positive way. Historical rental revenue values for Canada are a function of investment in construction and energy, which had a marked upward revision, so the equipment rental revenue estimates were revised accordingly.

All of this information is provided by IHS Global Insight, a leading economic forecasting firm. ARA makes the forecast data available to ARA members by paid annual subscription. For more information, contact Tracy Johannsen at 1-800-334-2177, ext. 270 or email Tracey at tracy.johannsen@ararental.org.


CIBC gazes into the crystal ball

Without key domestic economic drivers to shelter Canada from a continued weak global economy, GDP growth will slip to a very mediocre 1.7 per cent in 2013, finds CIBC’s latest Canadian economic forecast. “Having earlier tapped fiscal stimulus and a housing boom to shelter the economy from sluggishness abroad, the country’s ability to set its own course is now much more limited,” says Shenfeld. “Escaping economic mediocrity will depend on the kindness of strangers, with exports and related capital spending critical to Canada’s fate in 2013-14.”

Shenfeld says that the global economy continues to face significant headwinds and as a result he has cut his global outlook for 2013 by two-tenths to three per cent. “It’s too early to get the full benefits of policy stimulus in Asia, Europe is too stubborn to soften its fiscal drag enough and amplify ECB bond purchases, and Washington is too wedded to getting going on fiscal tightening stateside, if not the full fiscal cliff.” [This was written on Dec. 19, 2012. U.S. policymakers have since reached a deal to avoid the worst effects of the fiscal cliff, but still face a “fiscal ski hill,” according to a later report by CIBC. – Ed.]

He adds that while Chinese GDP could show improvement towards an eight per cent pace as early as Q4 of 2012, it is not likely to have much of an impact on other economies as Chinese imports are currently showing no growth at all on a year-over-year basis. As such, he expects there to be a delay before crude oil and other resources rebound in price. “The absence of a helping hand from abroad will leave Canada exposed,” says Shenfeld. “Blaming temporary disruptions in energy production in Q3 for recent disappointments misses the point: GDP excluding resource extraction has also been decelerating, the loss of home building momentum will offset greater oil output.