Investment in equipment and software is projected to expand 9.1 percent in 2018 according to the 2018 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation. The annual investment growth projection, which is well above the estimated 5.2 percent growth rate experienced in 2017, continues the strong improvement trajectory seen over the last 12 months. While a few headwinds persist, they should be outweighed by an encouraging business investment climate. The Foundation’s report, which is focused on the $1 trillion equipment leasing and finance industry, highlights key trends in equipment investment and places them in the context of the broader U.S. economic climate.
Ralph Petta, President of the Foundation and President and CEO of the Equipment Leasing and Finance Association, said, “This forecast for higher-than-expected growth in capital equipment investment is indeed good news. Business conditions appear favorable heading into the new year, with Washington poised to enact lower corporate tax rates and the economy continuing to grow slowly and steadily. Equipment finance organizations we talk to are bullish about 2018 growth projections for the industry.”
Highlights from the study include:
- 2018 capital spending should continue on solid footing as businesses are confident and interest rates remain low. Overall, investment in equipment and software is expected to grow by 9.1 percent. However, the Federal Reserve is likely to raise its benchmark interest rate 25 basis points in December and another 100 basis points during 2018 due to strong economic growth and continued labor market tightening, which could slow growth in the second half of the year.
- Credit market conditions are mostly healthy as credit supply remains steady and financial stress is at historic lows.
- The U.S. economy looks set to experience moderately strong growth in 2018. Business investment is likely to remain solid during the first half of the year, while strong labor market health should keep consumer spending growing in the 2–4% range. Although residential investment continues to disappoint, surging global demand should lift exports, even as the dollar strengthens. Overall, the U.S. economy is projected to grow 2.7% — above the consensus estimate of 2.1–2.5%.
- The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals. In addition, the “Momentum Monitor Sector Matrix” provides a customized data visualization of current values of each of the 12 verticals based on recent momentum and historical strength. Most equipment verticals should expect their growth outlook to improve in 2018 relative to 2017. Over the next three to six months:
- Agriculture machinery investment growth should remain steady.
- Construction machinery investment growth should remain stable.
- Materials handling equipment investment may strengthen.
- All other industrial equipment investment is expected to accelerate.
- Medical equipment investment growth may experience weaker growth.
- Mining and oilfield machinery investment growth is likely to remain strong, but may moderate soon.
- Aircraft investment growth is likely to remin solid.
- Ships and boats investment growth should remain steady.
- Railroad equipment investment growth should remain strong, though may soften soon.
- Trucks investment growth is expected to increase moderately.
- Computers investment growth should remain strong.
- Software investment growth should remain steady.
The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The report will be updated quarterly throughout 2018.
Download the full report at https://www.leasefoundation.