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Equipment Leasing and Finance Foundation releases 2018 outlook

Overall, investment in most equipment verticals should be strong in 2018.


The Equipment Leasing & Finance Foundation recently released its 2018 Equipment Leasing & Finance U.S. Economic Outlook. It is forecasting investment in equipment and software to grow 9.1% in 2018, and GDP to grow 2.7%.

The report focuses on the $1 trillion equipment finance industry, and includes equipment investment expectations for 12 key verticals in the Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor.

Equipment and software investment outlook:
Stronger business investment growth over the course of 2017 is expected to continue into the new year, as the U.S. economy benefits from a relatively broad-based cyclical upturn. We expect the solid growth pattern of the past two quarters will continue into Q4 and 2018.

Persistently strong business optimism, stable credit conditions, and robust global demand are expected to be key drivers of economic growth, while the primary headwind will be a rising interest rate environment.

  • Agriculture Machinery investment growth should remain steady the next two quarters.
  • Construction Machinery investment growth should remain stable over the next three to six months
  • Materials Handling Equipment investment growth may strengthen over the next three to six months.
  • All Other Industrial Equipment investment growth should strengthen over the next three to six months.
  • Medical Equipment investment growth may weaken over the next three to six months.
  • Mining and Oilfield Machinery investment growth should remain strong, but may soften somewhat over the next two quarters.
  • Aircraft investment growth is likely to remain solid over the next three to six months.
  • Ships and Boats investment growth should remain stable over the next three to six months.
  • Railroad Equipment investment growth should remain strong, but may moderate over the next two quarters.
  • Trucks investment growth should continue to improve over the next three to six months.
  • Computers investment growth is likely to remain strong over the next three to six months.
  • Software investment growth should remain stable over the next three to six months.

U.S. capital investment and credit markets
U.S. credit conditions are in decent shape, with credit supply mostly unchanged from previous quarters and financial stress at historic lows. However, weak credit demand indicates that businesses are turning to other forms of financing for their investments. Some of this may be due to a rising rate environment, with the Federal Reserve likely to raise its benchmark interest rate in December and four additional times in 2018.

Overview of the U.S. economy
Buoyed by a global cyclical upturn and a longstanding improvement in labor market conditions, business investment and consumer spending are set for a strong 2018. These factors, combined with healthy global demand propelling a rise in exports, should outweigh a generally weak outlook for residential investment. Overall, the economy is likely to see significantly better growth in 2018 than in the past two years.

Bottom Line for the equipment finance sector
2018 should be a solid year for the equipment finance industry, building on improvements seen over the course of 2017. While a few headwinds persist, they should generally be outweighed by an encouraging business investment story. The foundation projects 2.3% GDP growth for 2017, driven by a 5.2% expansion in equipment and software investment. For 2018, we expect the U.S. economy will grow by 2.7%, while equipment and software investment appears set to expand by about 9.1%.

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