Equipment Leasing and Finance Association (ELFA) predicts U.S. businesses, nonprofits and government agencies will spend over $1.6 trillion in capital goods or fixed business investment (including software) in 2018. ELFA also says that in 2018, businesses are expected to make their largest capital investments since 2012.
The organization assists businesses and financiers in understanding the market environment via its Top 10 Equipment Acquisition Trends for 2018. Its forecasts include:
1. Capital spending will have its strongest performance in six years. 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. There will be positive momentum in financed equipment acquisitions. 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. 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. 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.
5. Technological advances in equipment will attract businesses looking to improve efficiencies. Attractive financing options will make the latest equipment that may have been considered previously unaffordable more accessible.
6. Key equipment verticals will continue to rebound in 2018. Investment is expected to remain steady or strengthen in equipment verticals, including agriculture, aircraft, construction, industrial, trucks, computers and software.
7. Businesses will ramp up efforts to fulfill requirements of new accounting rules for their leased equipment. With the new lease accounting standard taking effect beginning in 2019, businesses with leases on the books will find that equipment finance providers are developing strategies and products beneficial to lessees.
8. Financing options and services for equipment acquisitions will be more innovative and customer driven. Expect more tailored financial solutions to help companies innovate and solve business challenges, such as metered usage and wider use of electronic documents and signatures.
9. Trade issues will pose headwinds affecting global demand for U.S. business exports. A gradual strengthening in the dollar since 2017, if maintained, could be a headwind to trade exports.
10. External wild cards will factor into equipment acquisition decisions. Wild cards include outcomes of U.S. midterm elections, U.S. policies on immigration, and how much the residential housing market recovers.