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CIT Survey Forecasts Increased Spending on New, Used Equipment

CIT Construction, a unit of CIT Group, a global provider of commercial and consumer finance solutions, last week announced the results of its 31st annual CIT Construction Industry Forecast which finds a majority cautiously optimistic about 2007, with many expecting to increase spending on new and used equipment in the coming year.

CIT Construction surveyed more than 900 contractors and equipment distributors by phone on their perceptions of the industry and trends for the coming year.

“While the level of optimism varied across the United States, many respondents indicated they plan to increase their spending on new and used equipment in the coming year, which portends to more activity in the industry,” said Ron Riecks, president of CIT Construction.

About 29 percent of contractors indicate they plan to spend more on used equipment in 2007, a 15 percent jump from 2005, while 11 percent more contractors said they plan to purchase new equipment in 2007.

Rented or leased equipment is expected to meet about 39 percent of non-builders’ needs in 2007, according to survey respondents, while 19 percent of builders’ needs are likely to be met through rental.

Half of the distributors surveyed expect their equipment rental income to grow in the next year, while the number of distributors planning to raise rental rates was 55 percent, the fifth consecutive year of increase in that area.

Still, distributors have less ambitious equipment acquisition plans in 2007, the survey said, in anticipation of slightly softer demand for rental equipment. Fewer distributors expect to meet their rental equipment demand by growing their equipment fleet, ending a three-year expansion of rental inventories. However, those who plan to add to their fleet expect on average to grow their fleet size by 22 percent, the highest CIT survey estimate since 2001.

The West North Central region, including Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota, predicts an increase in equipment rentals in 2007.

Among contractors, 18 percent said backhoes and loaders were the equipment they expect to rent the most often in 2007, followed by excavating equipment 11 percent; small tools 10 percent; aerial work platforms 9 percent; compaction equipment and scaffolding 8 percent; cranes and heavy earthmoving equipment 6 percent. Five percent of respondents picked forklifts, jackhammers, air and electric hammers as their most frequently rented equipment category.

Most contractors and equipment distributors surveyed are confident about their ability to maintain or grow their profits in the coming year. More than half of each group expect their net income to stay about the same, while 30 percent of contractors and 34 percent of distributors said their income will increase.

About 30 percent of respondents said they plan to diversify their business as a marketing strategy in the coming year.

Technology continues to be a growing area of interest, with 97 percent of distributors and 79 percent of contractors saying they use the Internet as a business and informational tool.

Most contractors still think residential construction will provide the best opportunities in the coming year. More than two-thirds of builders and one-third of non-builders said home and apartment construction is their best opportunity for 2007.

A high percentage of contractors and distributors cited a shortage of workers, especially qualified technicians and other skilled employees, as their biggest business problem.

A complete copy of the forecast can be found at

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