Perhaps this year more than in past years, it's worth training an eye on possible trends - including in the equipment finance industry - as we ease into a post-pandemic economy.
U.S. businesses, nonprofits and government agencies are expected to spend more than $1.8 trillion in capital goods or fixed business investment (including software) this year, financing a majority of those assets, according to the Equipment Leasing and Finance Association (ELFA).
With that in mind, here are the Top 10 Equipment Acquisition Trends to watch compiled from the Equipment Leasing & Finance Foundation's 2021 Equipment Leasing & Finance U.S. Economic Outlook, which takes into account industry participants' expertise and member input from ELFA meetings.
Check out these first five and then jump to the full list of ten at the bottom:
- The U.S. economy will be a tale of two halves. The effects of the pandemic will continue with business restrictions and suppressed spending during the winter months. GDP growth will be weighted toward the second half of the year once vaccines are widely available, and the upside potential for economic growth later in the year is substantial with 4.7% GDP growth forecast for 2021.These trends impact a significant portion of the U.S. economy.
- Capital spending will show positive growth. The way that millions of Americans live, work and socialize was impacted by the pandemic and required many businesses to reconfigure business operations. This is likely to continue in 2021, providing a sustained boost to equipment and software investment in the first half of the year, resulting in positive 7.8% growth for the year.
- A vast majority of U.S. businesses will acquire equipment through financing. The propensity to finance equipment is higher than it has been over the last two to three years as long-term interest rates have fallen sharply. The Fed is committed to keeping interest rates at or near zero for several years, which bodes well for businesses seeking financing. The Fed’s infusions of liquidity into the money supply also make cash more available and stabilizing for the economy.
- Customer demands and products will evolve beyond pandemic needs. Demand for equipment needed to connect employees working from home will change as organizations adopt hybrid workplace models and make other adjustments for conducting business. The growth of bundled, managed services agreements and efficient customer service solutions will continue as businesses seek greater support and flexibility in acquiring and managing equipment. Reduced travel, less need for commercial space and technology upgrades will be among wide-ranging impacts in the wake of the pandemic.
- Many key equipment types will show growth as a result of the pandemic. Broad-based investment growth is expected across a range of equipment types after plunging to historic lows in Q2 2020. Medical equipment should benefit from vaccine distribution and resumption of elective medical procedures. Construction equipment investment should improve with increased demand for single-family homes, while trucks will get a boost from demand for over-the-road transportation as consumer spending strengthens throughout the year. Travel, airlines and hospitality will continue to be negatively impacted until full deployment of vaccines.