Capital investments seen rising in 2018

Capital investments seen rising in 2018

Financing association forecasts 9 percent U.S. growth rate in 2018 in business equipment and software spending.

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December 19, 2017
Edited by Brian Taylor

The Washington, D.C.-based Equipment Leasing & Finance Foundation has released a forecast predicting business investment in equipment and software will expand 9.1 percent in 2018 in the United States.

The foundation’s 2018 Equipment Leasing & Finance U.S. Economic Outlook report, which can be found on this Web page, indicates the 9.1 percent projection is well above the estimated 5.2 percent growth rate experienced in 2017.

While a few headwinds persist, they should be outweighed by an encouraging business investment climate, according to the foundation. The foundation indicates its report, which is focused on the $1 trillion equipment leasing and finance industry, highlights key trends in equipment investment and places them in the context of the broader U.S. economic climate.

“This forecast for higher-than-expected growth in capital equipment investment is indeed good news,” says Ralph Petta, president of the foundation and President and CEO of the Equipment Leasing and Finance Association. “Business conditions appear favorable heading into the new year, with Washington poised to enact lower corporate tax rates and the economy continuing to grow slowly and steadily. Equipment finance organizations we talk to are bullish about 2018 growth projections for the industry.”

Highlights from the study include:

  • 2018 capital spending should remain on solid footing as businesses are confident and interest rates remain low. Overall, investment in equipment and software is expected to grow by 9.1 percent. However, the Federal Reserve is likely to raise its benchmark interest rate 25 basis points in December and another 100 basis points during 2018 due to strong economic growth and continued labor market tightening, which could slow growth in the second half of the year.
  • Credit market conditions are mostly healthy as credit supply remains steady and financial stress is at historic lows.
  • The U.S. economy looks set to experience moderately strong growth in 2018. Business investment is likely to remain solid during the first half of the year, while strong labor market health should keep consumer spending growing in the 2 to 4 percent range. Although residential investment continues to disappoint, surging global demand should lift exports, even as the dollar strengthens. Overall, the study projects the U.S. economy to grow 2.7 percent, above other estimates of 2.1 to 2.5 percent.

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals, including:

  • construction machinery (investment growth should remain stable);
  • materials handling equipment (investment may strengthen);
  • mining and oilfield machinery (investment growth is likely to remain strong, but may moderate soon);
  • agriculture machinery (investment growth should remain steady);
  • all other industrial equipment (investment is expected to accelerate);
  • trucks investment growth (expected to increase moderately);
  • aircraft investment growth (likely to remain solid);
  • ships and boats investment growth (should remain steady);
  • railroad equipment investment growth (should remain strong, though may soften soon);
  • computers investment growth (should remain strong);
  • software investment growth (should remain steady); and
  • medical equipment investment growth may experience weaker growth.

The foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with Washington, D.C.-based economics and public policy consulting firm Keybridge Research