Investment in Construction Equipment to Achieve Above Average Growth

April 3, 2013

Investment in construction equipment should grow at above-average rates the next three to six months, according to the Equipment Leasing & Finance Foundation. But the Q2 update to the 2013 Equipment Leasing & Finance U.S. Economic Outlook suggests that rate will continue to decline from recent highs.

Overall investment in equipment and software is expected to grow 5.6 percent in 2013, the report says. The Foundation increased its 2013 equipment and software investment forecast to 5.6 percent, up from 2.9 percent growth forecast in its 2013 Annual Outlook released in December 2012.

The report, which is focused on the $725 billion equipment leasing and finance industry, forecasts equipment investment and capital spending in the United States and evaluates the effects of various related and external factors in play currently and into the foreseeable future.

The Q2 report predicts growth in the first half of the year will be limited by relatively weak demand and fiscal policy uncertainty. By the second half of 2013, however, investment activity is expected to accelerate due to an improving housing sector, a resurgence of the U.S. manufacturing sector, an energy renaissance and relief from policy uncertainty that will have an unlocking effect on business investment.

Highlights from the study:

  • The U.S. economy is expected to generate positive but modest growth of 2.2 percent in 2013.
  • Equipment and software investment grew at the unexpectedly rapid rate of 11.8 percent (annualized rate) in Q4 2012, a welcome increase after Q3’s 2.6 percent decline. Part of this may have been a “pulling forward” effect as businesses anticipated changes in tax policy in 2013. This suggests that Q1 and Q2 2013 may be a bit weaker than previously anticipated.  However, the second half of 2013 is expected to be an improvement over the first half.
  • Credit market conditions continue to improve, and many indicators have returned to levels not seen since the onset of the recession.