After entering 2025 on steady footing, the U.S. economic outlook has worsened amid sharp declines in consumer and business sentiment, rapidly rising inflation expectations, and sky-high policy uncertainty. As a result, the Q2 update of the 2025 Equipment Leasing & Finance U.S. Economic Outlook has revised its 2025 equipment and software investment forecast to 2.8% (down from 4.7%) and its U.S. GDP forecast to 1.2% (down from 2.7%).

The report, which was released today by the Equipment Leasing & Finance Foundation, forecasts that a “growth pause” by the end of 2025 is more likely than a sustained downturn, although the probability of a near-term recession has clearly risen.

“Extraordinarily high economic uncertainty related to U.S. trade policy has sent shockwaves through the economy, prompting large swings in financial markets and a sharp reduction in equipment finance industry confidence,” Leigh Lytle, President of the Foundation and President & CEO of the Equipment Leasing and Finance Association, said. “At the same time, labor markets remain healthy, consumer spending bounced back in March, and the manufacturing sector appears to be holding its own. The elephant in the room is tariffs: if the administration ultimately moves forward with the ‘reciprocal’ tariff rates announced in early April, they will weigh heavily on the economy’s growth prospects this year. On the other hand, if bilateral or multilateral deals are struck with key trading partners and these additional tariffs are avoided, the business climate would quickly improve.”

Key takeaways from the 2025 Outlook:

• U.S. economy: Tariffs and their related uncertainty effects are expected to weigh on the economy, with most economic forecasts predicting weak or negative GDP growth, higher inflation, and lower household disposable income this year.
• Manufacturing: The manufacturing sector has exhibited noticeable improvement in recent months. Several measures of industrial activity have strengthened, including industrial production, capacity utilization, and the ISM Purchasing Managers Index for Manufacturing. Moreover, shipments and new orders of core capital goods have been generally positive in recent months, driven by strong growth in primary metals, computers, and electronics. These readings may reflect tariff-related pull-forward activity, and it is noteworthy that new business volume is roughly flat year-to-date while industry confidence has plummeted as measured by ELFA’s Capex Finance Index and ELFF’s Monthly Confidence Index, respectively.
• Equipment and software investment: First-quarter investment in equipment and software is expected to bounce back after a poor Q4, in part due to a “pull-forward” effect as end-users attempt to front-run tariffs. However, uncertainty around trade policy and heightened concerns about the overall economic climate are expected to drag on investment growth over the next six months.
• Equipment finance industry: Higher equipment prices due to tariffs could lead more end-users to explore financing options. On balance, however, the impact of tariffs to the equipment finance industry is likely to be negative, as this issue has coincided with a sharp increase in economic uncertainty, which often results in firms delaying major investment decisions until the outlook becomes clearer. The new tariff regime is likely to result in slower economic growth and a weaker environment for equipment and software investment for the remainder of the year. The accompanying U.S. Equipment & Software Investment Momentum Monitornow tracks seven investment verticals, down from 12, and includes a sector matrix to visualize momentum and historical performance.

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is released in conjunction with the Economic Outlook, has been revised to track seven equipment and software investment verticals from 12 previously. In addition, the Momentum Monitor Sector Matrix provides a customized data visualization of current values of each of the seven verticals based on recent momentum and historical strength. This month four verticals are weak but accelerating, while three are weak and decelerating. Over the next six months the Foundation expects the following trends to materialize on a year-over-year basis:

• Agriculture machinery: Modest improvement expected, but overall growth likely to remain weak.
• Construction machinery: Growth expected to remain negative.
• Energy equipment: Modest improvement forecasted.
• Industrial equipment: Growth may slow or turn negative, though recent data is encouraging.
• Medical equipment: Investment expected to increase.
• Technology equipment/software: Projected to strengthen.
• Transportation equipment: Growth likely to contract.

The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economic and public policy consulting firm Keybridge Research. The annual economic forecast provides the U.S. macroeconomic outlook, credit market conditions, and key economic indicators. The Foundation’s Q2 report has been revised to include more data visualization for enhanced clarity and readability. The report will be updated quarterly throughout 2025.

The Economic Outlook is produced in partnership with Keybridge Research and will be updated quarterly throughout 2025.

Download the full report: leasefoundation.org/industry-resources/u-s-economic-outlook
Momentum Monitor: leasefoundation.org/industry-resources/momentum-monitor
Library of studies: store.leasefoundation.org