ELFF forecasts 3.9% expansion in equipment and software investment, 2.2% GDP growth

Equipment and software investment growth decelerated for the second consecutive quarter and is expected to moderate at 3.9% (unchanged from the Q3 Update of the Economic Outlook published in July).

These are among the findings in the Q4 Update to the 2019 Equipment Leasing & Finance U.S. Economic Outlook released today by the Equipment Leasing & Finance Foundation.

Overall, the economy is expected to expand 2.2 percent, down from the previous estimate of 2.5 percent, with growth driven primarily by consumer spending.

Highlights from the report include:

•  Capital spending has been noticeably weaker in 2019 and may slow further over the remainder of the year due to heightened trade uncertainty and industrial sector weakness. However, credit market conditions remain healthy despite tightening credit conditions for commercial real estate and consumer loans and somewhat weaker demand for business loans. Financial stress has ticked up in 2019 by most measures but remains at healthy levels overall.

•  U.S. economic growth decelerated to 2.0 percent in the second quarter, down from to 3.1 percent growth in Q1. Consumer spending improved significantly and is a key driver of economic growth. However, the manufacturing sector and business investment remain weak. Although robust consumer spending will likely remain a tailwind over the remainder of the year and the U.S. housing sector is showing signs of improvement, trade tensions with China, equity market volatility, and decelerating job creation are key potential risks as 2019 draws to a close.

Jeffry D. Elliott, Foundation Chairman and Senior Managing Director of Huntington Equipment Finance, said, “While we continue to expect both the overall economy and equipment and software investment to moderate this year, they should remain positive. Measures of consumer optimism have declined in recent months, though remain high by historical standards, reflecting a strong labor market and solid wage growth.”

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, 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. Momentum readings are below the long-term historical average in 8 of 12 verticals, however 7 of the 12 verticals saw recent momentum accelerate in October Over the next three to six months:

•  Agricultural machinery investment growth should improve;
•  Construction machinery investment growth is likely to grow at a moderate pace;
•  Materials handling equipment investment growth will likely remain weak;
•  All other industrial equipment investment growth is likely to remain modest;
•  Medical equipment investment growth should strengthen;
•  Mining and oilfield machinery investment growth is likely to remain weak;
•  Aircraft investment growth is likely to remain negative;
•  Ships and boats investment growth should remain weak;
•  Railroad equipment investment growth is likely to weaken;
•  Trucks investment growth is expected to remain positive;
•  Computers investment growth will likely continue to weaken; and
•  Software investment growth should continue expanding at a moderate pace.

The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economic and public policy consulting firm Keybridge Research. The economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook, and key economic indicators. The Q4 report is the final update to the 2019 Economic Outlook before the publication of the 2020 Economic Outlook in December.

Click here to download the full report. All Foundation studies are available for free download from the Foundation’s online library at http://store.leasefoundation.org/.