With the economy making a dramatic improvement, ELFA ( Equipment Leasing and Finance Association) is warning potential equipment investors that $1.6 trillion will be spent on heavy equipment in 2016. This is mainly due to the uncertain presidential election outcome which may cause shifts in certain policies. Oil prices also affect the overall increase in equipment cost from the low selling prices which will directly impede any energy investments investors have made in energy equipment.
Businesses of course are hesitant to invest due to the recent up and down economic behavior. Then there’s the future rate hike when the zero interest rate policy dies out. Many other contributing factors also affect the spike in heavy equipment costs. China’s ever decreasing economy is also affecting the world. This will impact all trade partners involved including Japan and Russia. The United States won’t be as deeply affected since only 7% of exports go to China directly.
There are of course unforeseen factors that may present problems for investors regarding the acquisition of heavy equipment, many of which most investors may not have considered. The terrorist attacks are one thing. Capital spending resources may be temporarily diverted to preventing any more impending attacks. Then there’s the potential economic growth in the United States regarding employment. This could in fact be beneficial or detrimental depending on what direction consumers choose to take with their increased wealth. Spending may rise but so too might inflation. If that happens the Feds will quickly respond with a hike in interest rates. On the other hand, consumers may choose to hang onto their money which will continue to stagnate the economy.
Despite all of the economic uncertainty, one thing remains clear. ELFA seems to be correct in their predictions. Investors will be facing an increase in spending for heavy equipment no matter how they look at it.