While investment in equipment and software is expected to grow 3.1 percent in 2014, according to the Equipment Leasing & Finance Foundation’s 2014 U.S. Economic Outlook, construction equipment investment is expected to decline by 5 to 10 percent. The report, which focuses on the $827 billion equipment leasing and finance industry, shows mixed performance across equipment sectors.
“Looking into 2014, businesses will be making financing decisions in a dynamic environment,” said William G. Sutton, CAE, president of the foundation and president and CEO of the Equipment Leasing and Finance Association. “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.”
The U.S. economy is expected to grow 3 percent in 2014. 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:
• Agriculture equipment investment is expected to remain weak on a quarter-to-quarter basis, and is projected to decline by 4 percent in 2014.
• As expected, construction equipment investment declined in Q3 of 2013, falling 2.8 percent year-over-year. After reaching record-levels of investment in 2013, this vertical will likely decline by 5 to 10 percent in 2014.
• Computers and software investment is expected to continue growing at the current below average rate. Annual growth should be in the 2 to 4 percent range during Q4 of 2013.
• Industrial equipment investment accelerated to 5 percent 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.
The report will be updated quarterly throughout 2014.