Investment in equipment and software is projected to expand 9.1 percent in 2018 according to the 2018 Equipment Leasing & Finance U.S. Outlook and recently 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.
“This forecast for higher-than-expected growth in capital equipment investment is indeed good news," said Ralph Petta, president of the foundation, and president and CEO of the Equipment Leasing and Finance Association. "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.
- Credit market conditions are mostly healthy as credit supply remains steady and financial stress is at historic lows. Businesses are reasonably confident about making new investments, but could be feeling somewhat overleveraged, which could lead to investments increasingly being financed by means other than credit.
- 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.
- Railroadequipment 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 bottom line:
2018 should be a solid year for the equipment finance industry, building on improvements seen over the course of 2017. While a few headwinds persist, they should generally be outweighed by an encouraging business investment story.