The Equipment Leasing & Finance Association says equipment and software investment growth is expected to be robust this year with annual equipment and software investment growth forecast at 11.2 percent for 2021.
Also, annual U.S. GDP growth for 2021 is forecast at 5.7 percent according to the Q2 update to the group's 2021 Equipment Leasing & Finance U.S. Economic Outlook.
“Finally, we are beginning to see the light at the end of the tunnel," said Scott Thacker, foundation chair and CEO of Ivory Consulting Corporation. "The widespread availability of vaccinations offers hope that economic activity will soon return to pre-pandemic levels, or beyond. The robust stimulus efforts, along with trillions of dollars in pent-up demand, point to a wave of spending this summer and fall. All indicators point to 2021 being a banner year for equipment and software investment, and the equipment finance industry is poised to benefit from that expected economic activity.”
Highlights from the Q2 update to the 2021 Outlook include:
- The equipment and software investment growth forecast of 11.2 percent benefited from a 21 percent surge in Q4 2020, which provided a strong jumping-off point for 2021.
- The U.S. economy expanded at 4.3 percent (revised) annualized rate in Q4 2020 as the nation struggled with surging Covid-19 cases and deaths. Although the labor market recovery is still far from complete and the K-shaped recovery has left millions of consumers in a precarious position, the overall balance of risks is on the upside.
- The U.S. manufacturing sector continued to improve in early 2021 due to strong demand for both consumer and business goods. Underlying demand remains strong, although supply chain backlogs should be monitored and rising input prices could become an increasingly significant concern in the months ahead.
- Main Street managed to weather the winter months and the third wave of the pandemic, although not without significant difficulty. Further federal relief and stimulus efforts have played an outsized role in the survival and longer-term viability of many businesses. Warmer weather, rising vaccination rates, and the relaxation of pandemic-era operating restrictions offer hope that there are better days ahead.
- The Federal Reserve again confirmed its commitment to keeping interest rates at zero until at least 2023. The Fed also ended a pandemic-era capital requirement relief measure that could cause turmoil in bond markets.
- Headwinds to keep an eye on include the potential for higher inflation, the ongoing labor market recovery, and the emergence of new virus strains that could reduce the effectiveness of existing vaccines.
The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is released in conjunction with the Economic Outlook, tracks 12 equipment and software investment verticals. Nine verticals are showing signs of accelerating investment after the pandemic-fueled collapse, and three other verticals are showing signs of peaking, although investment growth should remain healthy in the near term. Over the next three to six months, year over year, here are key highlights:
- Construction machinery investment growth could return to positive territory, though recent movement suggests that upside potential is limited.
- Materials handling equipment investment growth should remain in positive territory.
- All other industrial equipment investment growth should return to positive territory.
- Mining and oilfield machinery investment growth appears to have bottomed out and should improve despite this month’s decline.
- Trucks investment growth should return to positive territory.
- Computers investment growth should remain strong.
- Software investment growth should accelerate.