February 18, 2024
The American Rental Association (ARA) has introduced a brand-new layer to its economic research and forecasting toolchest: equipment rental and event rental diffusion indexes, which ARA has termed Equipment and Event Rental Segment Index (RSI).
A diffusion index is used by various industries as a barometer. It is a measurement, based on compiled survey response data, of trends and the overall direction a particular industry is headed economically.
“We are committed to providing our members with useful research and forecasting inputs,” says Tom Doyle, ARA vice president of program development. “We partnered with the industry-leading research firm to provide our membership with another tool that will assist in identifying trends in both the equipment and event segments”.
To develop these diffusion indexes, or RSIs, ARA asks members whether they see the economic conditions for their rental segment improving or deteriorating during the upcoming quarter:
- Responses indicating improving economic conditions are scored with a 100.
- Responses indicating worsening economic conditions are scored with a 0.
On each RSI that pulls together members’ responses, an average score of higher than 50 indicates the market is expanding.
The most recent quarter’s Equipment RSI pegged the North American market at 60, indicating positive momentum.
John McClelland, Ph.D., ARA vice president for government affairs and chief economist, says it’s important to understand that each rental segment’s RSI is an economic indicator only, not a numbers-based forecast.
“These indexes are not forecasting tools, but rather a measure of current sentiment as expressed by market participants,” McClelland says. “There is also not a direct link between levels of the index and, say, revenues. For example, a reading of 75 does not imply a 20 percent increase in revenues over a reading of 55. However, a reading of 75 certainly indicates a significantly stronger market sentiment than a reading of 55.”
The RSIs from ARA are developed with the assistance of S&P Global Market Intelligence, the international forecasting firm that compiles data and analysis for ARA’s Rentalytics™ members-only subscription service. Findings from the RSIs are presented in ARA’s quarterly economic forecasting webinars, available to Rentalytics subscribers.
You can get started with Rentalytics and gain access to the RSIs here.
