Investment in equipment and software will grow next year at a 2.2% pace, according to the 2024 Equipment Leasing & Finance U.S. Economic Outlook. This will be slightly below the growth rate of the past 12 months, according to the report’s publisher, Equipment Leasing & Finance Foundation.
An accompanying report, The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, forecasts that investment in construction equipment is “likely to remain positive.” The Monitor tracks 12 equipment and software investment verticals, including construction equipment.
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Investment in construction machinery fell 3.9% (annualized) in the third quarter of 2023, according to the report, but it was 11% above its year-ago level. The Construction Momentum Index held steady at 95.4 in December. The Index indicates that investment growth in construction equipment should remain positive over the next two quarters.
“The Foundation’s annual outlook demonstrates that the economy has thus far managed to ‘thread the needle’ by maintaining solid growth in the face of higher interest rates while inflation returns to more acceptable levels,” said Zack Marsh, the Foundation’s chair, in a statement. “However, it also reveals that we’re not out of the woods yet, and a recession is still possible during the first half of the year. Overall, while breakout growth in equipment and software investment looks unlikely in 2024, the prospect of lower interest rates and acceptable inflation levels should keep the industry on sound footing.”
Key Expectations for 2024
- The Economic Outlook cited a sluggish 0.5% growth rate in the third quarter, compared to 7.0% in the second quarter. It expects elevated interest rates to continue to drag on investment in 2024, and notes that the climate for near-term investment is still weak. The Foundation expects modest growth in Q4 and the first half of 2024, but anticipates a pick-up in investment activity during the second half of the year.
- The U.S. economy expanded at a robust 5.2% annualized rate in Q3 as the labor market proved surprisingly resilient to higher interest rates and consumers continued to spend, according to the report. The combination of a healthy labor market, cooling inflation, and improved consumer sentiment make a “soft landing” scenario increasingly likely. Still, it is premature to declare victory: high government expenditures contributed much more to GDP in 2023 than they will in 2024, consumer spending may soften amid rising financial stress, and global economic conditions remain weak, according to the report.
