The Equipment Leasing and Finance Association released its 34th annual “What’s Hot/What’s Not” report, which reveals industry perceptions of 15 equipment markets based on a survey of ELFA members. The survey results point to construction, machine tools, medical, technology and marine/intercoastal as the leading sectors for the year ahead, according to portfolio preference.

Authors Carl Chrappa and Gregory Chrappa of The Alta Group presented the results at the ELFA’s Equipment Management Conference in New Orleans. The results reveal the following overall ranking of equipment types for portfolio preference among ELFA members. These rankings are based on the amount of future financing volume (unweighted) and the best and least favorable future equipment financing opportunities (weighted):

1. Construction
2. Machine Tools
3. Medical
4. Hi-tech/Computers
5. Marine/Intercoastal
6. Rail
7. Aircraft
8. Tie: Oil/Gas/Energy and Plastics
9. Containers/Chassis
10. Automobiles
11. Tie: Telecom and Trucks/Trailers
12. FF&E
13. Printing

The report findings indicate that for the second consecutive year, equipment managers and equipment finance companies have become less optimistic about almost all types of equipment, a reflection of the expected effects of rising interest rates, increased regulations and a slowing economy.

“The report showed us that many companies are working through some effects of the pandemic in addition to what’s going on in the macroeconomic environment – high interest rates and potential slowness or sluggishness in the economy,” Leigh Lytle, president and CEO of the ELFA, said.

Lytle is cautiously optimistic about the economy’s ability for a soft landing. Equipment Leasing & Finance Foundation research found that the U.S. has likely avoided a recession and anticipates real equipment and software investment growth of 2% this year, pointing to slightly slower but strong investment activity in the latter half of 2024.

“I spend a lot of my time talking with our members, and I think the sentiment throughout the industry is pretty positive overall,” Lytle said.

Compared to last year’s “What’s Hot/What’s Not” report, trucking faced the largest change in the ranking, dropping to 12th place from a tie with medical at third in 2023. However, the significant drop did not come as a surprise to the ELFA.

“It’s been in such a unique spot since the COVID-19 pandemic, so the drop wasn’t completely unanticipated,” Lytle said.

The results also include overall lower scores and a strong preference for only three equipment types: construction, machine tools and medical.

The coming years may see additional shifts in the report. Currently, the market is seeing pushes for automation and artificial intelligence, both things that the ELFA is keeping an eye on.

“To the extent that these things need to be incorporated, whether it’s in this report or others, we will do so,” Lytle said.

The ELFA’s research team works closely with the report’s authors to not only assess the survey but to ensure the ELFA is responding to changes in the environment. The upcoming U.S. presidential election may influence changes in the ELFA’s reports.

“When there is a governmental push or governmental intervention, we see those sectors become ‘hot’ and ‘on the rise,’” Lytle said. “This is why I spend so much of my time speaking with our members; they’re on the ground. It’s important for me to understand what’s going on with the current trends and for our members to share that information with each other.”

The “What’s Hot/What’s Not” report is designed to assist equipment finance organizations in identifying business opportunities for future success. The full report, as well as an infographic with key takeaways, is available online.