William G. Sutton, CAE, President of the Foundation and President and CEO of the Equipment Leasing and Finance Association, said, “The equipment finance industry has seen positive growth so far in 2015, and recent data from the Foundation’s Monthly Confidence Index and the Association’s Monthly Leasing and Finance Index point to a healthy business sector. This positive trend is expected to continue throughout the year, driven by a strengthening economy and improved business confidence. Both supply and demand for credit are growing, and although the likelihood of a Fed rate increase later this year could lead to market volatility, it may also encourage businesses to pull forward planned investments in order to lock in current rates before they rise.”
Highlights from the study include:
- Overall, GDP is expected to grow 3.1% in 2015 as the economy finally hits its stride. Several headwinds — notably the strong U.S. dollar and harsh winter storms — could limit growth in 2015, yet growth is expected to exceed 3% for the first time since 2005. Growth drivers include a brighter jobs picture, greater access to credit, a rebound in consumer confidence and a housing market that could finally accelerate in 2015. Oil markets are a wild card, as sustained low prices could provide a significant boost to the economy despite hurting investment in certain equipment sectors.
- Equipment and software investment was subdued in the fourth quarter of 2014, slowing from 10.5% in Q3 to just 1.6% in Q4. Growth for all of 2014, however, was still a solid 5.8%, and even with a slightly slower expected pace of growth in 2015, the Outlook report forecasts businesses will be encouraged to increase their capital spending with the overall economic expansion.
- Lending to businesses has steadily increased, and businesses appear poised to increase their credit demand. For both large and small businesses, steady economic growth and reduced uncertainty may translate to increased confidence about the future — and, as a result, increased demand for credit.
The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report and tracks 12 equipment and software investment verticals, forecasts the following equipment investment activity:
- Agriculture machinery investment growth will likely remain negative over the next three to six months.
- Construction machinery investment could pick up over the next three to six months.
- Materials handling equipment investment growth should remain steady over the next three to six months.
- All other industrial equipment investment will likely remain steady over the next three to six months.
- Medical equipment investment growth is expected to remain strong over the next three to six months.
- Mining and oilfield machinery investment should continue to decline in the next three to six months.
- Aircraft investment growth may slow over the next three to six months.
- Ships and boats investment growth may increase in the next three to six months.
- Railroad equipment investment growth rates could decline over the next three to six months.
- Trucks investment growth should remain steady or potentially decline over the next three to six months.
- Computers investment growth rates could slip over the next three to six months.
- Software investment growth will likely remain stable over the next three to six months.
The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The Q2 report is the first update to the 2015 Annual Outlook, and will be followed by two more quarterly updates before the publication of the 2016 Annual Outlook in December.
Download the full report at www.leasefoundation.org/research/eo/
The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Funded through charitable individual and corporate donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at www.LeaseFoundation.org.
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