This month’s Rental Sentiment Index registered 6.3, which is consistent with last month's score and recent expansionary readings between 6 and 7. The RSI is based on a 10-point scale, where readings above 5.0 indicate expansion, and is derived from expectations for North American commercial and industrial construction equipment rental revenues, volumes, rates, time utilization and capex.

A 6.3 reading signals moderate rental expansion, which is considered to be the optimal growth environment for the rental industry, according to investment banking firm Piper Jaffrey. Moderate industry growth encourages the ongoing secular penetration of rentals and mitigates against over-investment in the rental fleet.

RER in partnership with Piper Jaffray released results from November’s Rental Sentiment Survey, which gauges the outlook of the construction equipment rental industry. The survey population consists of executives and senior managers in the construction equipment rental industry covering every region of North America representing more than $13 billion in annual revenues. Data from this month's survey, which reflects responses from 70 equipment rental executives across North America, finds healthy rental industry growth expectations. Midterm elections and oil prices are a part of the focus this month and participants found both to be potential tailwinds to overall construction equipment rental activity.

Survey participants noted that "federal spending is an important driver" for the construction and rental industry. This is particularly important in the wake of the U.S. midterm elections where there were sweeping gains by the Republican Party, which claimed majority control of both the House and the Senate.

The new political landscape will likely result in the Oval Office and Congress being gridlocked over the next two years. Beyond 2016, uncertainty over which party will assume the presidency has contractors renting instead of buying. The result is the dual effect of what is perceived will be a status quo over the next two years and uncertainty beyond 2016 helping to drive the secular penetration of rentals.

Survey participants reveal that construction backlogs indicate "higher than average rental needs throughout the upcoming winter." This sentiment reflects consistent expansion in residential and non-residential construction demand in North America. The results of the survey also suggest that declining oil prices are providing a tailwind to growth as construction activity and the macro environment get a boost from lower input costs.

Survey participants noted that "reduced oil and gas prices should lower costs for construction and industrial businesses." Reflecting this healthy backdrop are higher expectations in our survey for rates and capex, both leading indicators for rental activity. Rental rates over the next 12 months are expected to increase 2.8 percent year over year, up from 2 percent in October, while capex expectations have increased from 4.1 percent to 5.6 percent.

Piper Jaffray is an investment bank and asset management firm, serving the needs of corporations, private equity groups, public entities, non-profit entities and institutional investors since 1895. It is headquartered in Minneapolis.

RER has covered the equipment rental industry since 1957, providing its readers with a mix of news, features and product information.