Equipment Acquisition Trends for 2016
The Equipment Leasing and Finance Association (ELFA) released its list of Top 10 Equipment Acquisition Trends for 2016. Compiled through industry research, industry participants’ expertise and ELFA member input, the trends are issued to help businesses and other organizations as they execute their equipment acquisition strategies during the coming year.
Some highlights for construction equipment are noted below, but you can find the organization's complete news release, video and infographic of the trends here.
U.S. businesses, nonprofits and government agencies will spend more thanb $1.6 trillion in capital goods or fixed business investment in 2016. ELFA President and CEO Ralph Petta said, “Equipment acquisition is critical in driving the supply chains across all U.S. manufacturing and service sectors. Equipment leasing and financing provide the source of funding for a majority of U.S. businesses to acquire the productive assets they need to operate and grow."
Some key trends:
U.S. investment in equipment and software will hit a new high, but moderate in growth as businesses hold back on spending. After a sustained period of increasing share of GDP, the equipment investment cycle has likely peaked. Manufacturing weakness, global uncertainty and low oil prices are headwinds.
The growth of equipment acquired through financing will increase solidly, but more slowly. Despite large volume and a rising propensity to finance, the waning replacement cycle and businesses’ continued hesitancy to expand will slow the rate of growth.
Businesses will begin preparing for new lease accounting rules. The new accounting standard will change how leases are accounted for on corporate balance sheets, but the primary reasons to lease remain intact, from maintaining cash flow, to preserving capital, to obtaining flexible financial solutions, to avoiding obsolescence.
Equipment investment will vary widely by industry vertical. Underperforming: agriculture, mining and oilfield, railroad, industrial and materials handling equipment. Construction equipment should remain solid with an improving housing sector.
Low oil prices will continue to impede energy investment. Improved U.S. oil industry efficiency and increased international supply will keep oil prices low and dampen energy equipment investment.
Wild cards:
- Low inventory in a housing market poised for a breakout year could either cause construction investment to surge or push up home prices and deter would-be buyers.
- The stronger U.S. labor market could accelerate wage growth, which would cause consumer confidence and spending to rise, but may also spur inflation, which could encourage the Fed to raise interest rates faster than expected.
- The threat of continuing terrorist attacks could present economic and policy implications that divert investment.
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