The Equipment Leasing and Finance Foundation has upped its forecast for future growth in investment in equipment and software this year, predicting it will now expand 4.3% in 2017, surpassing its earlier estimate of a 3.6% rise.
The Q4 update to the Foundation’s 2017 US Economic Outlook report says the revised investment growth estimate is driven by the combination of continued elevated business confidence, a recovering oil sector, and the release of pent-up demand following lackluster investment growth in 2016.
The report predicts that equipment and software investment will improve significantly from last year’s performance, even amid uncertainties relating to tax and trade policy, along with heightened geopolitical tensions.
Ralph Petta, president of the Foundation and president and CEO of the Equipment Leasing and Finance Association, said: “Continued strong fundamentals in the US economy together with low interest rates and an optimistic business sector provide the ingredients for a vibrant, healthy equipment finance industry in 2017.
“Despite Washington policy makers’ inability to coalesce around major initiatives designed to spur economic growth even further, equipment finance professionals in a variety of markets report strong and stable origination volume. Certain distressed industry sectors are slowly recovering, giving rise to a positive outlook for the remainder of the year.”
The study indicates that, overall, equipment and software investment is expected to expand by 4.3% in 2017 after solid growth in both Q1 and Q2 of 4.5% and 8.3%, respectively.
Credit market conditions remain healthy, despite a moderate decline in credit demand over the last quarter. Lending standards are mostly unchanged.
Demand for credit fell across multiple consumer and business loan types, however portfolios are exceptionally strong and financial stress is muted, the research concluded.
The Foundation-Keybridge US Equipment and Software Investment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals and reports that most should expect their growth outlook to improve in 2017 relative to 2016.
Over the next three to six months, the study predicts additional investment is likely to be seen in sectors covering agriculture machinery, ships and boats, and materials handling. Investment in computers and software is holding steady.
Construction machinery investment growth is likely to decelerate, while spending on medical equipment is likely to continue to slow down, and there could be a drop off in investment in aircraft.
Mining and oilfield machinery investment growth will continue to rebound, though growth rates may peak soon, and spending on trucks is also expected to resume, the study suggests. The Monitor also predicts railroad equipment investment growth should improve, though it highlights recent negative movement is notable and should be monitored.