The Equipment Leasing & Finance Foundation released the Q2/23 Equipment Leasing & Finance Industry Snapshot, an information resource for industry participants. The foundation projected the U.S. economy will enter a recession this year and grow by just 0.7%.
The U.S. economy expanded in Q4/22 following two quarters of contraction in the first half of the year. The Q4 expansion was driven by a large increase in other business investment, as well as consumer and government spending.
Among the range of details in the Q2 snapshot:
- Economic tailwinds for growth in 2023 include:
- A strong labor market, which added more than 1 million jobs in Q1 and boosted consumers’ financial situations despite high inflation.
- Low energy prices after a temperate winter and a realignment of supply lines.
- Economic headwinds include:
- Sticky inflation, which remains a substantial problem for the U.S. economy. Annual CPI inflation currently stands at 5% after peaking at 8.9% in June 2022, but is still above the Federal Reserve’s target of 2%.
- Geopolitical uncertainty due to threats including Vladimir Putin and Russia’s war effort against Ukraine increasing, China and Russia’s apparent alliance, and concern that China could invade Taiwan in the near future.
- Factors to Watch:
- Consumer financial stress appears to be under control, but signs are mounting that it may rise in the coming months.
- The housing sector appears to be showing some signs of life but remains far from recovered and may have further to fall.
- The federal debt ceiling and the potential for market turmoil if the government defaults.
- Equipment and software investment is expected to grow at a 1% pace in 2023. Equipment and software investment growth is forecasted to steadily ease throughout the year as businesses pull back on investment due to higher interest rates and a slowing economy.
- New business volume growth reported in the Equipment Leasing and Finance Association’s Monthly Leasing and Finance Index was up 11% year-over-year in February. Though the strong gains are partly due to high inflation, new business volume growth has held up well over the last year, even as interest rates have risen.
