Originally posted on ELFA.org – to read the article regarding 2018 forecasts in full, please click here. 

Investment in technology related equipment is expected to expand 9.1 percent in the new year according to the 2018 Equipment Leasing & Finance U.S. Economic Outlook released by Equipment Leasing & Finance Foundation today. The annual investment growth projection, which is well above the estimated 5.2 percent growth rate experienced in 2017, looks set to continue on the same upward trajectory we have experienced in 2017. While a few obstacles remain, an encouraging business investment climate should prove enough to forge ahead. The Foundation’s report highlights key trends in equipment investment and sheds light on their context in the greater financial climate.

President Ralph Petta of the Foundation 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. 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 growth 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 remain 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.

You can download the full report HERE. All Foundation studies are available for free download.