After solid growth in 2017, investment in equipment and software should remain strong in 2018 and is projected to expand 7.9 percent (up from 7.0 percent in the third-quarter Economic Outlook published in July) according to the fourth-quarter update to the 2018 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation.
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.
Strong economic momentum should drive investment activity through the rest of the year, though certain industries appear to be peaking and may begin to weaken in the months ahead.
Jeffry D. Elliott, Foundation chairman and senior managing director of Huntington Equipment Finance, said, “The equipment finance industry appears to be on sound footing with solid growth prospects in the months ahead. Overall, investment in most equipment verticals should remain healthy through the remainder of 2018 and into early 2019.”
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. Overall, investment in most equipment verticals should remain solid in 2018.
Over the next three to six months:
- Construction machinery investment growth should hold steady.
- Mining and oilfield machinery investment growth may strengthen.
- Material handling equipment investment growth should remain modest.
- Ships and boats investment growth is expected to accelerate.
- Railroad equipment investment growth should improve.
- Trucks investment growth should remain solid.
- Computers investment growth should remain solid.
- Software investment growth may soften.
Other highlights from the study include:
- Capital spending has been solid to date this year. Business confidence levels are currently elevated, supported by strong fundamentals in the U.S. economy. This should translate into steady expansion in equipment and software investment through the rest of the year with overall investment up 7.9 percent in 2018.
- Credit market conditions remain healthy for the fourth quarter, with little change in supply or demand relative to third quarter. Despite the late stage of the credit cycle and rising interest rates, financial stress decreased in the second quarter. The Federal Reserve is likely to raise its benchmark interest rate once more in 2018 for a total of four rate hikes over the year to curb inflationary pressures.
- Overall, 2018 is likely to be a solid year for the U.S. economy and may approach 2015’s 2.9 percent expansion as the best year for growth since the recession. The U.S. economy has continued to post strong gains throughout 2018, with positive contributions to GDP from most major sectors of the economy.