2019 Economic Outlook Forecasts 4.1% Expansion In Equipment and Software Investment and 2.3% GDP Growth

Washington, D.C. (December 11, 2018)—Investment in equipment and software is projected to expand 4.1 percent in 2019, according to the 2019 Equipment Leasing & Finance United States Economic Outlook released today by the Equipment Leasing & Finance Foundation (the Foundation). Equipment and software investment increased at a robust rate in the first half of 2018, driven by more preferable tax treatment and a general upswing in the U.S. economy.

However, growth slowed in the third quarter, and recent data points to a continuation of this trend, providing a weak jumping off point for 2019. The economy remains generally healthy, yet the strong growth achieved in Q2 and Q3 is unlikely to be repeated in 2019 as headwinds build. Highlights from the study include:

•   Capital spending has experienced moderate growth in 2018, though equipment and software investment has waned over the course of the year. While sustained economic momentum should carry capital investment into 2019, investment growth may continue to fade next year as the business cycle matures further. Credit market conditions remain healthy, with an increase in the supply of credit in the third quarter and subdued financial stress levels, though demand for credit declined.
•   The U.S. economy accelerated in 2018, spurred by stronger growth in business investment, a historically healthy labor market, lower tax rates and increased government spending. Consumers have been the main driver of growth over the past year, and near-record consumer confidence should keep spending levels elevated through at least the first half of 2019. However, residential investment is likely to remain weak, mounting trade frictions will constrain U.S. exports, and the global economy appears to be losing steam. Overall, while the U.S. economy remains healthy, growth is likely to soften in 2019 compared to the previous 12 months.  
•   Looking ahead, the equipment leasing and finance industry appears poised to continue expanding into 2019. However, growth is likely to moderate as the effect of tax cuts wanes and the business cycle matures further, while rising interest rates will continue to put upward pressure on financial stress.

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report, tracks 12 equipment and software investment verticals. In addition, the Momentum Monitor Sector Matrix provides a customized data visualization of current values of each of the 12 verticals based on recent momentum and historical strength. Several equipment verticals should expect their growth outlook to remain steady in the first half of 2019. Over the next 3 to 6 months:

•   Agriculture machinery investment growth is likely to slow.
•   Construction machinery investment growth should hold steady.
•   Materials handling equipment investment is likely to expand at a moderate rate.
•   All other industrial equipment investment growth will likely remain weak and may contract.
•   Medical equipment investment growth is expected to slow.
•   Mining and oilfield machinery investment growth will likely continue to decline.
•   Aircraft investment growth should improve.
•   Ships and boats investment growth should accelerate.
•   Railroad equipment investment growth may increase.
•   Trucks investment growth is expected to slow.
•   Computers investment growth will likely remain stable.
•   Software investment growth should remain solid.

The report will be updated quarterly throughout 2019. Download the full report at leasefoundation.org/industry-resources/u-s-economic-outlook.