Equipment investment set to pick up

The latest quarterly update from the Equipment Leasing and Finance Foundation (ELFF) has lowered its forecast for equipment and software investment to 4.1%, down from a 5% growth forecast in July, but says growth for the full year overall will improve.

ELFF’s Q4 update to its 2015 Equipment Leasing and Finance US Economic Outlook predicts that after a slow start to the year, equipment investment will pick up during the second half of 2015.

William Sutton, president of the Foundation andpPresident and CEO of the Equipment Leasing and Finance Association (ELFA), said: “The Foundation’s Outlook forecasts that equipment and software investment will pick up over the second half of 2015 after a slow start — although concerns about global economic weakness, renewed political uncertainty, and other potential headwinds are key trends to watch in the coming months.

Sutton added: “This outlook is consistent with data from the Foundation’s Monthly Confidence Index and ELFA’s Monthly Leasing and Finance Index, which both indicate solid industry performance. Capital spending is expected to outpace GDP growth again this year, and the investments made by US businesses are increasingly reliant on financing solutions.”

The latest study shows growth in equipment and software investment slowed from 3.9% in Q1 2015 to 1.7% in Q2, driven by sharp contractions in energy and railroad investment. Overall, a modest pickup in investment is forecast for Q3 and Q4, bringing annual investment growth to 4.1% in 2015, down from 6% in 2014.

The report says that although the Fed kept interest rates at zero in September, citing global economic fears, an interest rate hike is anticipated in late 2015 or early 2016. The prospect of higher interest rates could encourage businesses to “pull forward” investment and provide a boost to the equipment finance industry.

The Foundation-Keybridge US Equipment and Software Investment Momentum Monitor, which is included in the report and tracks 12 equipment and software investment verticals, forecasts solid growth in construction machinery and aircraft investment over the next three to six months. Medical equipment investment growth is expected to stabilize or slow over the same period, along with investment in materials handling equipment, and agriculture machinery investment growth will likely remain weak or negative, as will mining and oilfield machinery investment. Software investment growth will likely remain strong over the next three to six months.