After severe declines in equipment and software investment in Q1/20 and Q2/20 due to the effects of COVID-19 and the impact of social distancing measures on the U.S. economy, investment in equipment and software is projected to improve relative to the first half of the year as businesses reopen. With substantial uncertainty owing to the pandemic, equipment and software investment growth is forecast to between -5.6% and -9.6%. With GDP growth measured relative to the prior quarter, unless Q3/20 involves an extended nationwide economic shutdown, positive growth for the U.S. economy is highly likely in the second half of the year, with an annual growth rate forecast to between -4.0% and -7.3%, according to the Q3/20 update to the 2020 Equipment Leasing & Finance U.S. Economic Outlook from the Equipment Leasing & Finance Foundation.
“This update to the U.S. Economic Outlook illustrates the wide-ranging impacts that COVID-19 has had on equipment and software investment as well as on broader economic factors, including credit, the small business outlook, consumer finances and business financial stress,” Scott Thacker, chair of the ELFF and CEO of Ivory Consulting, said. “The pandemic stalled business investment in the first half of 2020 and the near-term outlook for most equipment verticals is bleak. Computer and manufacturing investment may be the rare bright spots in the latter half of the year as manufacturers and businesses create ways to safely open.”
Highlights from the Q3/20 update include:
The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is released in conjunction with the Economic Outlook, tracks 12 equipment and software investment verticals. In addition, the Momentum Monitor Sector Matrix provides a customized data visualization of current values of each of the 12 verticals based on recent momentum and historical strength. Momentum readings are below the five-year average in 11 of 12 verticals, with computers being the lone exception, and 9 of 12 verticals are decelerating. Over the next three to six months:
The full report of the Momentum Monitor is available here.
The ELFF 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 Q3/20 report is the second update to the 2020 Economic Outlook and will be followed by one more quarterly update before the publication of the 2021 Economic Outlook in December.
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