High interest rates and slowing economic growth will continue to impact equipment and software investment growth as the year progresses, according to the Equipment Leasing & Finance Foundation’s third quarter update to its 2023 Equipment Leasing & Finance U.S. Economic Outlook.
The report revealed that economic growth in Q1/23 was stronger than initially estimated, leading the foundation to raise its annual U.S. GDP forecast to 1.6%. However, after investment contracted in the first quarter — and with a potential recession still looming on the horizon — the foundation revised its annual estimate for equipment and software investment growth down slightly to 0.9%.
“The U.S. economy posted surprisingly solid growth in Q1, and labor markets have been unexpectedly resilient to higher interest rates,” Nancy Pistorio, chair of the ELFF and president of Madison Capital, said. “Additionally, after a poor first quarter for equipment and software investment growth, it appears that the segment may have picked up a bit in Q2, and several of the foundation’s forward-leaning Momentum Monitors are in a better position today than they were earlier in the year. Nevertheless, as the report makes clear, the economic tide still looks to be going out: Core inflation is still above target, financial stress is rising and labor markets are likely to weaken substantially later this year as the effect of high interest rates sets in. While a so-called ‘soft landing’ is still possible, a mild recession beginning by year’s end is still the most likely base-case scenario.”
Highlights from the Q3 Update
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. This month one vertical is expanding, five are recovering/emerging and six verticals are weakening. Over the next three to six months, year over year:
The ELFF produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economic and public policy consulting firm Keybridge Research. The report is focused on the $1.16 trillion equipment leasing and finance industry and highlights key trends in equipment investment, placing them in the context of the broader U.S. economic climate.
Like this story? Begin each business day with news you need to know! Click here to register now for our FREE Daily E-News Broadcast and start YOUR day informed!