WASHINGTON, D.C. – Investment in equipment and software is expected to grow 5% in 2015, according to the Q3 update to the 2015 Equipment Leasing & Finance U.S. Economic Outlook recently released by the Equipment Leasing & Finance Foundation. As the U.S. economy rebounds from a disappointing first quarter, the report predicts that business confidence will improve, which should encourage greater investment over the second half of 2015. The outlook for 12 individual equipment and software verticals tracked in the report is mixed, with some sectors outperforming others. The Foundation’s Economic Outlook, which is focused on the $903 billion equipment leasing and finance industry, forecasts 2015 equipment investment and capital spending in the United States and evaluates the effects of various industry and external factors likely to affect growth over the next 12 months.
William G. Sutton, CAE, president of the foundation and president and chief executive officer of the Equipment Leasing and Finance Assn., said, “Despite a weak start to the year and remaining obstacles to growth, the Foundation’s Outlook reports that a strengthening U.S. economy bodes well for the second half of the year for equipment and software investment. Data from the Foundation’s Monthly Confidence Index and ELFA’s Monthly Leasing and Finance Index also reflect positive trends in equipment investment. In addition, expectations of a Fed rate increase later this year could encourage households and businesses to ‘pull forward’ investments in the coming months. The Outlook report also predicts that a steady increase in new business volume and a rising propensity to finance will drive positive growth for the equipment finance industry in 2015.”
Highlights from the study include:
- Investment in equipment and software is expected to grow 5 percent in 2015, down from 5.8% in 2014. Following a weak fourth quarter of 2014, equipment and software investment growth picked up modestly from 1.6& in quarter four 2014 to 3.8% in quarter one 2015. The struggling manufacturing and energy sectors are obstacles to growth, yet an improving economy should provide a lift to business investment and equipment finance activity during the second half of 2015.
- GDP is expected to grow 2.6% in 2015. After 2.2% growth in the fourth quarter of 2014, the U.S. economy contracted 0.2% in quarter one 2015, driven largely by harsh winter weather on the East Coast, a port strike on the West Coast, and a strong dollar that harmed net exports. Mirroring 2014, the disappointing first quarter is expected to hold back annual growth in 2015. Growth drivers expected to fuel faster growth for the rest of 2015 include a strengthening labor market, momentum in housing, and improved consumer spending.
- Credit availability and demand continue to gradually rise. The weak first quarter presented a short-term headwind to borrowing, but stronger growth over the remainder of the year should encourage greater borrowing from businesses in the second half of 2015.
- The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report and tracks 12 equipment and software investment verticals, forecasts the following equipment investment activity:
o Agriculture machinery investment growth will likely remain weak or negative over the next 3-6months.
o Construction machinery investment growth should remain steady over the next 3-6 months.
o Materials handling equipment investment growth could slow over the next 3-6 months.
o All other industrial equipment investment growth may decline further over the next 3-6 months.
o Medical equipment investment growth is expected to remain strong over the next 3-6 months.
o Mining and oilfield machinery investment should remain weak over the next 3-6 months.
o Aircraft investment growth may remain steady or moderate slightly over the next 3-6 months.
o Ships and boats investment growth may moderate in the next 3-6 months.
o Railroad equipment investment growth rates may decline over the next 3-6 months.
o Trucks investment growth could ease somewhat over the next 3-6 months.
o Computers investment growth rates should remain steady over the next 3-6 months.
o Software investment growth will likely remain stable over the next 3-6 months.
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 3-6 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 Q3 report is the second update to the 2015 Annual Outlook, and will be followed by one more quarterly update before the publication of the 2016 Annual Outlook in December.
Download the full report at www.leasefoundation.org/research/eo/.