Annual equipment and software investment growth is forecast at 13.3 percent for 2021, according to the Equipment Leasing & Finance Foundation. Annual U.S. GDP growth for year is forecast at 6.1 percent.
The forecasts are included in the third-quarter update to the 2021 Equipment Leasing & Finance U.S. Economic Outlook.
“The Q3 update indicates that America is now opening for business quickly,” said Scott Thacker, Foundation chair and CEO of Ivory Consulting Corporation, in a prepared statement. “The evidence illustrated in the Outlook points to a booming economy for the second half of the year as long as the pandemic remains in check, and despite several potential headwinds which must be monitored carefully. In the shorter term, strong growth for both the economy and the equipment finance industry are expected to be realized this summer.”
Q3 update highlights
- Equipment and software investment benefited from an 18-percent surge in Q1 and is well above its pre-pandemic level.
- The U.S. economy expanded at a robust 6.4 percent (revised) annualized rate in Q1 2021, an acceleration from Q4 2020. Q1 GDP was just 0.9 percent below its level at the end of 2019, indicating that the economy exceeded its pre-pandemic level in Q2.
- The U.S. manufacturing sector is still facing record levels of demand, even as the pandemic hamstrings key manufacturing centers around the world. However, industrial output in the U.S. has been constrained by acute shortages of key inputs and elevated prices.
- Main Street has emerged from the pandemic having suffered less damage than many expected, in part due to historic federal relief efforts. Consumers are spending again, capacity limits and distancing requirements have largely been lifted, and the outlook is as bright as it has been since the pandemic began.
- Federal Reserve officials have, for the most part, reached consensus agreement that inflation pressures will prove to be transitory. However, given the speed and magnitude of the economic rebound, the Fed has hedged a bit and signaled that rate hikes could begin in 2023.
- While the outlook is mostly positive, notable headwinds remain, including two—supply chain issues and services exports—that stem from the rest of the world’s continued struggles with Covid-19 and comparatively slower vaccination push. Additionally, the risk of sustained high inflation and the expiration of federal support measures are key factors to watch this summer and fall.
Construction equipment investment trends
The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is released in conjunction with the Economic Outlook, tracks 12 equipment and software investment verticals.
- Construction machinery investment growth should continue to strengthen over the next two quarters. Investment expanded 31 percent (annualized) in Q1 2021 and is 3.6 percent above its year-ago level. In May, shipments rose by 1.3 percent.
- Materials handling equipment investment growth will remain robust over the next six months. Investment grew at a 1.8 percent annualized rate in Q1 2021 and is up 12 percent from year-ago levels. In May, export prices of materials handling equipment ticked up by 1.1 percent and Exports rose by 20 percent.
- Trucks investment growth could strengthen over the next two quarters. Investment grew 11 percent (annualized) in Q1 2021 and is up 6.8 percent from year-ago levels. In May, manufacturers' inventories of light trucks & utility vehicles grew by 2.8 percent.
Source: ELFF
