Equipment investment outlook buoyant

Equipment and software investment looks set to grow strongly in 2017, buoyed by a more positive economic climate, according to the latest prediction from the Equipment Leasing & Finance Foundation.

It is forecasting a 2.8% increase this year. While this is slightly below the 3% growth forecast in its 2017 Annual Outlook released in December 2016, the Foundation says its Q2 quarterly update suggests considerable improvement over the -1.1% contraction in investment recorded for 2016 as a whole.

Ralph Petta, president of the Foundation and president and CEO of the Equipment Leasing and Finance Association, said: “Our forecast for an improving equipment finance sector is based largely on actions coming out of Washington that indicate a more business-friendly approach by the new Trump Administration, the recent move by the Fed to gradually increase short-term interest rates, and early indications of a steadily growing economy.

“It is our hope that these factors do in fact provide impetus for the equipment finance industry this year to outperform 2016.”

The Foundation’s data suggests that after negative growth for most of last year, equipment and software investment increased 1.7% in Q4 2016 and appears likely to resume a growth trajectory in 2017, particularly if elevated business confidence leads to increased business investment.

The US economy appears to be on a solid footing, despite an underwhelming finish to 2016 and slow start in 2017. Business investment and manufacturing activity continue to lag, but industry confidence indices point to an improved investment picture during the second half of the year.

However, economic headwinds, including risks associated with weak export growth, industrial sector sluggishness and government gridlock, should temper expectations.

The Foundation produces the report in partnership with economic and public policy consulting firm Keybridge Research, which provides additional information tracking covering 12 equipment and software investment verticals.

Latest research indicates most equipment verticals should expect their growth outlook to improve in 2017 relative to 2016.

Over the next three to six months, while agricultural machinery investment growth is likely to remain sluggish, construction machinery investment growth is expected to accelerate.

Materials handling equipment investment is predicted to grow at a slow but stable pace, and all other industrial equipment investment growth should improve, along with mining and oilfield machinery investment growth.

Medical equipment investment growth may slow, as may software investment growth, but investment in aircraft, ships and boats, railroad equipment and trucks is forecast to strengthen. Computers investment growth may modestly improve.