Washington, DC, October 8, 2013 – Investment in equipment and software is expected to grow 3.3% in
2013, according to the Q4 update to the 2013 Equipment Leasing & Finance
U.S. Economic Outlook released today by the Equipment Leasing
& Finance Foundation. Equipment and software investment slowed in the second quarter,
but the report predicts modest improvement in the second half of the year,
depending on the outcome of the current fiscal policy debates. Growth is
expected to be mixed, with some sectors outperforming others. The report, which
is focused on the $725 billion equipment leasing and finance industry,
forecasts equipment investment and capital spending in the United States and evaluates the
effects of various related and external factors in play currently and into the
foreseeable future.
According to the Foundation report, the U.S. economy is largely in the same
position it has been in for the past six months, with improving fundamentals
weighed down by a number of headwinds resulting in subpar growth. Positive
economic drivers noted in the report include a recovering housing market,
inexpensive natural gas benefitting households and the industrial sector, solid
auto sales, rising consumer confidence, improving credit availability for
households and businesses and steady job gains. However, the report notes that
a number of nagging headwinds, including fiscal consolidation, rising oil
prices, and renewed fiscal policy tensions, continue to constrain growth.
William G. Sutton, CAE, President of the Foundation and President
and CEO of the Equipment Leasing and Finance Association, said, “Equipment and
software investment in 2013 continues to look like a tale
of two halves, with slower growth in the first half of the year and modest
improvement forecast for the second half. However, an atmosphere of uncertainty
prevails, spurred by current fiscal policy debates, including the looming
debt-ceiling fight, and a stubbornly tepid U.S. and global economy.”
Highlights from the study include:
·
The U.S.
economy is expected to generate positive but modest growth of 1.7% in 2013.
- Equipment and software investment slowed from 3.1% annualized growth in Q1 2013 to just 1.0% (quarter-to-quarter annualized) in Q2. The slower growth is a reflection of broader macroeconomic headwinds and uncertainty, but also categorical revisions to the Bureau of Economic Analysis’s equipment investment accounts. Looking ahead, a modest uptick in investment is expected through the end of the year, with an overall forecast of 3.3% growth in equipment and software investment for 2013.
- Overall, the outlook for credit markets remains optimistic as investors continue to be risk-on, credit availability is steadily increasing, and the Federal Reserve is expected to maintain a near-zero short-term interest policy until economic conditions suggest otherwise.
·
Growth in equipment and software investment is expected to be
mixed. Leading indicators point towards a possible stabilization in investment
in agriculture equipment. Fairly average growth is expected for
investment in computers & software, construction, industrial, medical, and
transportation equipment. Trends include:
o
Agriculture equipment investment is expected to remain weak on a
quarter-to-quarter basis, but unusually poor performance in Q3 2012 could
translate into positive annual growth in the second half of 2013.
o
Computers & software investment is expected to grow at a
slower pace than has been observed over the past several years. Annual
growth should be in the 0% to 3% range during Q3 and Q4 of 2013.
o
Construction equipment investment continued its rapid growth, up
38% year-over-year in the second quarter, as investment has continued to grow
at what is likely an unsustainable rate. Leading indicators all
decelerated recently, suggesting that a negative correction could occur within
the next three to six months.
o
Industrial equipment investment grew 1.4% year-over-year in Q2 and
is expected to grow at a slightly faster rate in the second half of 2013.
o
Medical equipment investment indicators look bleak, suggesting
little to no growth going forward.
o
Transportation equipment investment is expected to improve some
and grow between 2% and 5% year-over-year moving forward
The Foundation produces the Equipment Leasing & Finance
U.S. Economic Outlook report in partnership with economics and public
policy consulting firm Keybridge Research. The annual economic forecast
released in December 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 third update to the 2013 Annual Outlook. The 2014 Annual
Outlook will be published in December.
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