The American Rental Association announced it projects U.S. equipment rental revenue to reach $48.9 billion in 2017 and then continue to grow at an average annual rate of 4.3 percent to top $56 billion in 2020, the association announced at the Rental Show.

Construction and industrial equipment rental revenue is forecast to grow by 3.7 percent in 2017, 4.2 percent in 2018, 5 percent in 2019 and 4.2 percent in 2020. ARA vice president for government affairs and chief economist John McClelland said revenues for the general tool segment are expected to grow even faster during the out years of the forecast because of continued improvement in the U.S. housing market, with increases of 2.9 percent in 2017, 5.1 percent in 2018, 5.3 percent in 2019 and 6.6 percent in 2020.

“We continue to see strength in key economic data that drive our rental revenue estimates,” said McClelland. “The economy continues to gain strength and the promise of tax reform, reductions in regulations, a more accommodative energy policy and additional infrastructure will only add to that strength. The big question continues to be how fast these changes will occur and go into effect.”

Quarterly update in 2016 previously showed positive expectations, but included a very gradual slowing in the expected growth of rental revenues over the year, according to figures compiled by IHS Markit, the economic forecasting firm that compiles data for ARA. The first quarterly forecast for ARA in 2017 reverses the trend with an expected gradual increase compared to last quarter’s forecast.

“The economy definitely hit a soft patch toward the middle of 2016 that somewhat lowered our expectations for growth in the economy as a whole as well as rental revenues,” said Scott Hazelton, managing director of IHS Markit. “We are now seeing a reversal in that growth trend suggesting a return to positive changes in our outlook for rental.”

IHS also estimated that the Rental Penetration Index for 2016, with the index falling from 52.9 percent to 52.8 percent in 2016, essentially flat. “The continued redeployment of equipment from oil and gas projects in early 2016 coupled with the expansion in 2016 construction spending and employment meant that contractors were expanding their fleets at a slightly higher rate than rental companies were expanding their fleets,” added Hazleton. “The ten basis point change in the Rental Penetration Index really indicates that rental companies in the construction and industrial equipment space are holding their own against increasing equipment acquisitions by contractor fleets even in the face of some headwinds in early 2016. Our forecast of a 3.9 percent increase in construction and industrial equipment investment in 2017 compared to 2016 is much stronger than the 2.1 percent investment growth from 2015 to 2016 and suggests that the growth in rental fleets will continue to increase.”

The latest ARA Rental Market Monitor forecast for Canada projects $5.148 billion in equipment rental revenue in 2017, which reflects a gradual slowing in growth rates to 3.3 percent compared to the November forecast. The 2018 forecast of 3.8 percent and 2019 forecast of 3.9 percent also reflect a gradual slowing compared to the November forecast, although the current forecast for 2020 is for a more robust 5.3-percent growth in equipment rental revenue in Canada, leading to $5.849 billion.