ELFF reports investment dip

Latest data from the Equipment Leasing and Finance Foundation (ELFF) suggests investment in equipment and software is set to increase this year, driven by an overall expansion in the economy, but at a slightly slower pace than in 2014.

The Q2 update to the Foundation’s 2015 Equipment Leasing and Finance US Economic Outlook report says spending in these areas by both large and small businesses is now expected to grow 5% percent in 2015, down from 6% growth forecast in its 2015 Annual Outlook released in December 2014.

William G. Sutton, ELFF president and CEO of the Equipment Leasing and Finance Association (ELFA), said: “The equipment finance industry has seen positive growth so far in 2015, and recent data from the Foundation’s monthly confidence index and the Association’s monthly leasing and finance index point to a healthy business sector.”

“This positive trend is expected to continue throughout the year, driven by a strengthening economy and improved business confidence. Both supply and demand for credit are growing, and although the likelihood of a Fed rate increase later this year could lead to market volatility, it may also encourage businesses to pull forward planned investments in order to lock in current rates before they rise,” Sutton noted.

The data shows equipment and software investment was subdued in Q4 2014, slowing from 10.5% in Q3 to just 1.6%. Growth for all of 2014, however, was still a solid 5.8%, and even with a slightly slower expected pace of growth in 2015, ELFF’s report forecasts businesses will be encouraged to increase their capital spending with the overall economic expansion.

The study shows lending to businesses has steadily increased, and businesses appear poised to increase their credit demand. The Foundation-Keybridge US Equipment & Software Investment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals. Of these, the medical equipment market is singled out as one where investment growth is likely to increase over the next three to six months, along with ships and boats.

In contrast, investment in other transport sectors, including aircraft, railroad and trucks, is more likely to slow, as will investment in computers. Mining and oilfield machinery investment is predicted to continue to decline, while construction machinery and software investment growth patterns are tipped to pick up.