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Equipment Investment Expectations Raised for 2014

April 3, 2014
Equipment finance companies expect winter losses to be recovered.

Investment in equipment and software is expected to grow 4.2 percent in 2014, according to the Q2 update to the 2014 Equipment Leasing & Finance U.S. Economic Outlook from the Equipment Leasing & Finance Foundation. This number is up from the 3.1 percent growth forecast in its 2014 Annual Outlook. The Q2 report expects equipment and software investment to steadily grow over the next six months as economic conditions solidify and business confidence continues to recover.

The Foundation report, which is focused on the $827 billion equipment leasing and finance industry, reflects a strengthening economy and positive trends in equipment investment, according to William G. Sutton, CAE, president of the Foundation and president and CEO of the Equipment Leasing and Finance Association.

“These findings align with data from the Equipment Leasing and Finance Association’s recent Monthly Leasing and Finance Index and the Foundation’s Monthly Confidence Index,” he said. “We know the cold winter has had some negative impact on the economy; however, with reduced policy uncertainty, stronger economic fundamentals and replacement demand, we remain optimistic about growth.”

Highlights from the Study

  • The U.S. economy is expected to grow 2.8% in 2014, the fastest pace since the 2008-09 recession.
  • The severe weather this winter may have trimmed GDP growth by a full percentage point, but it is expected that some of the loss will be made up in subsequent quarters.
  • Equipment and software investment grew at an annualized rate of 8.9% in Q4 2013, following modest growth of 2.2% in Q3.
  • Credit supply continues to improve, and credit demand has rebounded for all business sizes.   

Equipment and software investment is expected to steadily grow across most verticals, according to the Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, a newly expanded addition to the Outlook report. According to the Momentum Monitor, which track 12 equipment and software investment verticals:

  • Material handling equipment investment will experience slightly stronger growth over the next 3 to 6 months.
  • Agriculture machinery investment will likely see slow growth in the first half of 2014 as both farm yields and commodity prices ease.
  • Construction machinery investment will see stronger growth later in the year, but the year-over-year growth figures will appear weak due to a high base year effect.
  • All other industrial equipment investment will likely see moderate growth over the next 3 to 6 months as the manufacturing sector’s competitiveness improves.
  • Aircraft investment will likely slow after a strong Q4, and growth will be about average for the year.
  • Ships & boats investment will likely continue at a below-average pace over the next year.
  • Railroad equipment investment will improve from its recent contraction toward modest growth.
  • Investment in trucks will exhibit high-single digit growth over the next 3 to 6 months as economic activity improves and diesel prices remain competitive.
  • Computers investment will be muted in the next 3 to 6 months after strong replacement demand over the past few quarters.
  • Software investment will be moderate in the next 3 to 6 months as companies focus on upgrading to new technology.

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