Equipment Investment Slower, But Healthy in 2019

Industrial equipment

According to a report from the Equipment Leasing and Finance Foundation, equipment and software investment growth are likely to slow to 4.5% in 2019. While this is slower than the two previous years, it’s up from the 4.1% forecast in December.

Additional insight from the study included:

  • Business and consumer confidence levels have fallen from the 2018 highs inspired by tax reform but remain strong. After achieving 2.9% growth in 2018—tied with 2015 for the strongest year of growth during the current business cycle—the U.S. economy appears to have slowed in early 2019.
  • However, a strong labor market and rising wages should lead to solid consumer spending growth.
  • Capital spending exceeded expectations at the close of 2018, but business investment is facing risks due to a slowdown in the industrial sector and weaker global growth. This is despite a Q4 rebound fueled by lower oil prices.
  • The credit market remains mostly healthy, though banks continue to tighten lending standards.
  • Recent declines in business and consumer confidence, as well as the ongoing trade negotiations with China, will need to be monitored closely.
  • Overall, despite a slow first quarter, the equipment finance industry should resume its growth track in 2019.
  • Slower residential and nonresidential construction will impact the economy and industrial sector on several fronts.

Looking at some specific industrial segments:

  • Those expected to grow include agricultural machinery, material handling equipment, mining and oilfield products, aircraft production, automotive (trucks in particular), as well as computers and software.
  • Those expected to slow include construction machinery, medical equipment, marine vessels, and railroad cars.

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