Equipment investment spend on hold

Companies are holding back from spending on new equipment and software over concerns about the outcome of next month’s presidential election and the economic climate, according to the latest analysis from the Equipment Leasing and Finance Foundation.

Its Q4 update to the 2016 Equipment Leasing and Finance US Economic Outlook report says investment in equipment and software is expected to contract 0.5% percent in 2016, a downwards revision from the 0.9% growth forecast in its Q3 update released in July.

After contracting during the first two quarters, the new report forecasts modest equipment and software investment growth for the rest of 2016, as economic headwinds continue to weigh on investment spending and confidence. In comparison, investment levels were up by 3.8% in 2015.

Ralph Petta, president of the Foundation and president and CEO of the Equipment Leasing and Finance Association, said: “The softer growth numbers projected for 2016 reflect overall hesitancy on the part of business decision-makers to invest in equipment and software until the cloud that is the US election cycle clears in November. A potential wild card impacting 2017 investment growth is the Federal Reserve’s decision whether to increase short-term interest rates prior to year-end.”

The research suggests railroad equipment investment growth is poised to rebound, while investment in materials handling equipment and aircraft is likely to strengthen, and construction machinery investment growth may rebound modestly.

Over the next three to six months, the research also indicates medical equipment and software investment should remain solid, and trucks investment growth should improve, but mining and oilfield machinery investment growth will likely remain sluggish, along with ships and boats investment.