The Equipment Leasing & Finance Foundation (the Foundation) released its 2013 Equipment Leasing & Finance U.S. Economic Outlook today. 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. The 2013 Outlook projects equipment and software investment will grow, although at a below-average rate of 2.9 percent, hampered by weak demand and fiscal uncertainty.
The report notes that the outlook for investment in 2013 is largely contingent on the resolution of the “fiscal cliff,” which could either continue to send negative shock waves through the economy or offer businesses encouragement. Even once the fiscal challenges are resolved, it will take time to work out the details and for businesses to regain confidence. Looking forward into the third and fourth quarters of 2013, growth in equipment and software investment is expected to begin to regain momentum.
Highlights from the study
Domestic political risk is the major concern on the radar for 2013. The report calls for the U.S. economy to grow at a rate of 2.4 percent once major fiscal issues are resolved. Without a smooth solution to current fiscal challenges, growth is forecast to fall significantly below 2 percent.
Equipment and software investment took a significant hit in the third quarter of 2012, declining 2.7 percent (annualized rate) after a 4.8 percent increase in the second quarter. The data suggest that businesses have essentially “hit the pause button” on investment until there is a resolution to the “fiscal cliff.” Looking ahead to the second half of 2013, a strengthening housing sector and a reduction in political uncertainty could have an unlocking effect on business investment.
Trends in equipment investment
- Construction equipment investment is projected to average strong growth (about 15 percent) as the housing market maintains its forward momentum.
- Agriculture equipment investment is likely to contract in Q4 2012 and Q1 2013.
- Computers and software equipment investment is projected to stagnate for the next 3 to 6 months.
- Industrial equipment investment will grow but at a slower rate than recent quarters. Depending on the outcome of the fiscal cliff debate, manufacturing could drive stronger growth in the second half of 2013.
- Medical equipment investment growth is likely to range between -2 and 2 percent in the next 3 to 6 months.
- Growth in transportation equipment investment is likely to moderate, averaging about 10 percent over the next 3 to 6 months.
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 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 report will be updated quarterly throughout 2013.