US equipment, software investment to rise 8.5%

After solid growth in 2017, investment in equipment and software is predicted to expand 8.5% during 2018, according to the latest data from the Equipment Leasing & Finance Foundation.

Its 2018 US Economic Outlook survey puts the rate of increase at slightly below the 9.1% forecast in December, but its Q2 update remains positive.

Business investment is expected to expand robustly, and stable credit conditions should foster an environment helpful to growth.

Overall, the economy is expected to grow 2.7% in 2018 (unchanged from the previous outlook report).

Jeffry Elliott, ELFF chairman and senior managing director of Huntington Equipment Finance, said: “Business conditions continue to be favorable and are forecasted to be strong throughout 2018. As businesses implement their capital expenditure strategies in regard to tax reform, many equipment finance organizations are expecting the remainder of 2018 to expand the funding of transactions.”

The quarterly report by the Foundation highlights key trends in equipment investment, and says 2018 capital spending should remain on solid footing despite a slight increase in financial stress.

Credit market conditions generally remain healthy, though private sector loan growth has moderated in recent months. This is in part due to rising interest rates and increased cash flow from tax reform that have combined to push some businesses toward cash financing.

Overall, the economy should grow at a relatively steady pace over the course of the year, despite what appears to be a softer-than-anticipated first quarter.

The labor market will continue to firm and should result in increased consumer spending, while business investment will likely be a major bright spot in the coming year as tax cuts and a lighter regulatory touch encourage capital expenditure.

Associated research from the Foundation-Keybridge US Equipment and Software Investment Momentum Monitor, which tracks 12 equipment and software investment verticals, reports that overall investment in most equipment verticals should remain solid in 2018.

Over the next three to six months, construction machinery and materials handling equipment investment growth should remain strong, although there may be a tailing off in the agriculture machinery and other industrial equipment markets.

The research also suggests medical equipment investment growth may have peaked and is likely to decline, as will mining and oilfield machinery investment, along with ships and boats and railroad equipment investment. Software investment growth should remain steady.