As economic conditions solidify in 2014 and business confidence continues to recover, investment in equipment and software will grow 3.1%, according to the Equipment Leasing & Finance Foundation. The Foundation just released its Annual Equipment Leasing & Finance U.S. Economic Outlook for 2014, which expects investment to grow across most verticals as underlying economic fundamentals continue to improve. Overall in 2014, growth is forecast to be mixed, with some sectors outperforming others. The Foundation’s report focuses on the $827 billion equipment leasing and finance industry, and forecasts 2014 equipment investment and capital spending in the United States.
“Looking into 2014, businesses will be making financing decisions in a dynamic environment,” said William G. Sutton, CAE, president of the Foundation. “While the threat remains that policy uncertainty could negatively impact the U.S. economy and capital investment, potential stability in the federal budgeting process and an increase in GDP growth will drive up demand for equipment finance.”
Highlights from the study include:
- The U.S. economy is expected to grow 3.0% in 2014, the fastest pace since the 2008-09 recession. Assuming there is a solution to the current budget discussions, economic growth will be driven by a number of positive factors. Specifically, a strong housing market recovery, falling natural gas prices, robust auto sales, record high household wealth, steadily improving credit availability and improving employment. However, these positive trends are counter-balanced by high oil prices, slow international growth, moderating fiscal consolidation and the continued threat of policy uncertainty.
- In 2014, more dependable economic growth will help to generate stronger overall investment in equipment and software. Additionally, a rising interest rate environment could induce companies to lock in lower rates. Overall, these trends could yield a positive result for the equipment finance industry.
Trends in equipment investment include:
- Industrial equipment investment accelerated to 5.0% annual growth in Q3, and is expected to maintain a steady growth trend going forward. Employment, new orders and earnings data point to a positive 2014.
- Transportation equipment investment saw modest growth in the third quarter, and improving indicators point stronger momentum over the next six to 12 months.
- Agriculture equipment investment is expected to remain weak on a quarter-to-quarter basis, and is projected to decline by 4% in 2014.
- Computers & Software investment is expected to continue growing at the current below average rate. Annual growth should be in the 2% to 4% range during Q4 of 2013.
- As expected, construction equipment investment declined in Q3 of 2013, falling 2.8% year-over-year. After reaching record-levels of investment in 2013, this vertical will likely decline by 5% to 10% in 2014.
- Medical equipment investment grew in Q3 but the sector’s leading indicators suggest little to no growth going forward.