2017 Equipment Leasing and Finance U.S. Economic Outlook

This comprehensive report analyzes global and domestic trends impacting capital spending and economic growth in the coming year. It identifies key signposts specific to the equipment finance industry and features Momentum Monitors that identify turning points for 12 verticals in their respective investment cycles. The outlooks are updated quarterly.

Summary:

Equipment and Software Investment Outlook: Equipment & Software Investment Outlook: Receding headwinds should propel equipment and software investment toward decent growth in 2017, after a dismal 2016 witnessed three consecutive quarters of contraction. Although Q4 data, which has not yet been released, is likely to be stronger than recent quarters, we still expect equipment and software investment to contract -1.1% this year. However, early indicators point to a rebound in equipment investment in 2017. A key factor in this rebound is the energy sector, which has been a major drag on growth for several quarters but is no longer in freefall and should improve in the months ahead. This will benefit several equipment verticals that are closely tied to the energy sector. Meanwhile, most other verticals are also exhibiting positive signs and appear primed to improve in the first half of 2017.

• Agriculture Machinery investment growth will likely remain negative over the next three to six months.
• Construction Machinery investment growth should improve over the next three to six months.
• Materials Handling Equipment investment growth should remain stable over the next three to six months.
• All Other Industrial Equipment investment growth will likely rebound over the next three to six months.
• Medical Equipment investment growth should remain stable over the next three to six months.
• Mining & Oilfield Machinery investment growth is expected to improve over the next three to six months.
• Aircraft investment growth will likely strengthen over the next three to six months.
• Ships and Boats investment growth is set to improve over the next three to six months.
• Railroad Equipment investment growth should continue to strengthen over the next three to six months.
• Trucks investment growth is poised to accelerate over the next three to six months.
• Computers investment growth is likely to improve over the next three to six months.
• Software investment growth should continue to strengthen over the next three to six months.

U.S. Capital Investment and Credit Markets: U.S. credit conditions remain stable, with little change from last quarter in the areas of credit supply and financial stress, and a slight increase in credit demand (especially among consumers and households). Business demand for credit remains tepid but has improved from last quarter. Meanwhile, the Federal Reserve Board seems all but certain to increase its benchmark interest rate in December, which will further fuel a slow rise in U.S. bond yields over the course of 2017.

Overview of the U.S. Economy: As 2016 draws to a close, the U.S. economy appears to have finally moved past a growth pause and is poised for a rebound. Labor markets are this year’s persistent bright spot, and continued labor market strength is likely to drive additional gains in wages and income, consumption, and housing growth. Business investment and manufacturing activity were 2016’s big disappointments, but most indicators suggest that investment is emerging from a trough and should improve in the coming months. Overall, the economy is well-positioned for decent GDP growth in 2017.