In the Q4/15 update of the 2015 Equipment Leasing & Finance U.S. Economic Outlook, the Equipment Leasing & Finance Foundation lowered its forecast to 4.1%, down from 5% at the end of Q3/15.

The new report predicts that after a slow start to the year, equipment investment will pick up during the second half of 2015.

“The Foundation’s outlook forecasts that equipment and software investment will pick up over the second half of 2015 after a slow start — although concerns about global economic weakness, renewed political uncertainty, and other potential headwinds are key trends to watch in the coming months,” said William Sutton, president of the ELFF and president and CEO of the Equipment Leasing and Finance Association (ELFA). “This outlook is consistent with data from the Foundation’s Monthly Confidence Index and ELFA’s Monthly Leasing and Finance Index, which both indicate solid industry performance. Capital spending is expected to outpace GDP growth again this year, and the investments made by U.S. businesses are increasingly reliant on financing solutions.”

Highlights from the study include:

• The U.S. economy is expected to grow 2.6% in 2015. GDP growth accelerated from 0.6% in Q1/15 to 3.9% in Q2. Key drivers of the second-quarter expansion included consumer spending and housing investment, while net exports, government spending and business investment also positively contributed to growth.  However, the weak start to 2015 virtually assures that annual GDP growth will be below the long-term historical average of 3.0%.
• Growth in equipment and software investment slowed from 3.9% in Q1/15 to 1.7%in Q2, driven by sharp contractions in energy and railroad investment. Overall, a modest pickup in investment is forecast for Q3 and Q4, bringing annual investment growth to 4.1% in 2015, down from 6.0% in 2014.
• Recent gradual increases in credit supply and demand reflect a healthy U.S. credit system. Although the Fed kept interest rates at zero in September, citing global economic fears, an interest rate hike is anticipated in late 2015 or early 2016. The prospect of higher interest rates could encourage businesses to “pull forward” investment and provide a boost to the equipment finance industry.

As far as individual equipment verticals, the ELFF said that it expects investment in construction machinery, mining and oilfield machinery, aircraft, computers and software to remain solid or strengthen in the next three to six months. On the other side, investment in medical equipment, materials handling equipment, mining and oilfield machinery and trucks is expected to slow down.