Construction machinery investment will see stronger growth later in the year, but the year-over-year growth figures will appear weak due to a high base year effect.
This prediction is according to the second quarter update to the 2014 Equipment Leasing & Finance U.S. Economic Outlook released early this month by the Equipment Leasing & Finance Foundation.
Investment in equipment and software across all industries is expected to grow 4.2 percent in 2014, up from 3.1 percent growth forecast in its 2014 Annual Outlook released in December 2013. The Q2 report expects equipment and software investment to steadily grow over the next six months as economic conditions solidify and business confidence continues to recover. The report, which is focused on the $827 billion equipment leasing and finance industry, forecasts 2014 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.
According to William G. Sutton, president of the foundation and president and CEO of the Equipment Leasing and Finance Association: “The foundation’s outlook report reflects a strengthening economy and positive trends in equipment investment. These findings align with data from the Equipment Leasing and Finance Association’s recent Monthly Leasing and Finance Index and the foundation’s Monthly Confidence Index. We know the cold winter has had some negative impact on the economy; however, with reduced policy uncertainty, stronger economic fundamentals and replacement demand, we remain optimistic about growth.”
Highlights from the study include:
- The U.S. economy is expected to grow 2.8 percent in 2014, the fastest pace since the 2008-2009 recession.
- The severe weather this winter may have trimmed GDP growth by a full percentage point, but it is expected that some of the loss will be made up in subsequent quarters.
- Equipment and software investment grew at an annualized rate of 8.9 percent in Q4 2013, following modest growth of 2.2 percent in Q3.
- Credit supply continues to improve, and credit demand has rebounded for all business sizes.
- Equipment and software investment is expected to steadily grow across most verticals, according to the Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, a newly expanded addition to the outlook report. See Figure 1 for 12 equipment and software investment verticals predictions.