The Equipment Leasing and Finance Association (ELFA) which represents the $1 trillion equipment finance sector, today revealed its Top 10 Equipment Acquisition Trends for 2018. Given U.S. businesses, nonprofits and government agencies will spend over $1.6 trillion in capital goods or fixed business investment (including software) this year, financing a majority of those assets, these trends impact a significant portion of the U.S. economy. In 2018, businesses are expected to make their largest capital investments since 2012.
ELFA President and CEO Ralph Petta said, “Equipment acquisition is a key driver of supply chains across all U.S. manufacturing and service sectors. Equipment leasing and financing provide the source of funding for a majority of U.S. businesses—8 out of 10—to acquire the productive assets they need to operate and grow. We are pleased to again provide the Top 10 Equipment Acquisition Trends in order to assist businesses in understanding the market environment and planning their acquisition strategies.”
ELFA distilled recent research data, including the Equipment Leasing & Finance Foundation’s 2018 Equipment Leasing & Finance U.S. Economic Outlook, industry participants’ expertise, and member input from ELFA meetings and conferences in compiling the trends.
ELFA forecasts the following Top 10 Equipment Acquisition Trends for 2018:
1. Capital spending will have its strongest performance in six years. Following a significant improvement in equipment and software investment in 2017 over 2016, investment will continue robust growth in 2018. Elevated business confidence, fewer regulations and a broad-based cyclical upturn in the U.S. economy, due in part to the strongest global economy in over a decade, will contribute to a healthy business investment trend before potentially waning toward year end.
2. Look for strengthening positive momentum in financed equipment acquisitions. Although the growth of financed equipment acquisitions last year did not exceed overall equipment and software investment growth, equipment finance industry indicators point to increased financing of equipment acquisitions in 2018. The few persisting industry headwinds should be outweighed by a historically high propensity to finance and a healthy equipment and software investment forecast of 9.1 percent.
3. Tax reform will help unleash pent-up demand by businesses for new equipment. Long awaited corporate tax cuts will have businesses pulling the trigger on the equipment acquisitions they had been putting off. Multiple measures of business confidence, including the Monthly Confidence Index for the Equipment Finance Industry, back the probability for increased equipment spending.
4. Higher interest rates will loom as the economy grows and tax reform is enacted. A rising interest rate environment won’t deter investment in most key equipment verticals, but businesses will keep informed on Fed rate hikes. With the improving economy and its accompanying rise in inflation along with a substantial increase in the national debt owing to the new tax legislation, count on three and possibly four rate increases in 2018.