New Outlook Report Forecasts Rise in Investment in Equipment and Software in 2012

The Foundation produced the 2012 Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook, and key economic indicators. The report will be updated quarterly throughout 2012.

“The Foundation is pleased to present a valuable and unique tool that distills economic data from a variety of sources into a brief analysis specific to the equipment finance industry,” said Foundation Chairman Cameron W. Krueger, a Director at Deloitte. “Our industry is a critical component of the American economy and this report forecasts continued growth.”

“The new Equipment Leasing & Finance U.S. Economic Outlook complements the Foundation’s Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) and the Equipment Leasing and Finance Association’s Monthly Leasing and Finance Index (MLFI-25) in providing a full picture of industry and economic conditions affecting the $628 billion equipment finance industry from the historical, present, and future perspectives,” said William G. Sutton, CAE, President of the Foundation and President and CEO of the Equipment Leasing and Finance Association.

Key findings include:

o       Overall, investment continues to be a bright spot in the U.S. economy.  In particular, investment in equipment and software has grown steadily for eight straight quarters.  Expectations for 2012 are that growth will moderate slightly, but remain positive overall.
o       Trends in equipment investment include:
o       Agriculture equipment investment is likely to decelerate slightly in the next 3-6 months.
o       Computers & software equipment investment will remain healthy, but is likely to slow down somewhat.
o       Construction equipment investment is likely to slow in the immediate near term, but could be buoyed by the energy and housing sectors later in 2012.
o       Industrial equipment investment will likely be hampered by macro-trends, which may cause some deceleration in growth from what appears to be a recent peak in the growth rate.
o       Medical equipment is on watch for a leveling-off in investment spending.  Investment growth rates, while positive, have softened for six straight quarters and could bottom out in late 2012.  Still, near-normal growth is anticipated in the next 3-6 months.
o       Transportation equipment investment should remain solidly positive, but is unlikely to maintain the rapid growth rates of 2011.
o       Credit market conditions are improving slowly as demand for financing grows and supply constraints gradually ease.  However, the growth rate of investment in equipment and software is likely to remain moderate until demand puts more pressure on capacity.  Based on an outlook for moderate economic growth in 2012, and the overhang of excess industrial capacity, investment in equipment and software is expected to increase by 8-10 percent in 2012, compared to about 10.5 percent in 2011.
o       For the overall economy, recent revisions to U.S. gross domestic product (GDP) show that the 2008-09 recession was deeper and the recovery has been weaker than previously estimated.  While investment has buoyed an otherwise weak economy, employment and consumer demand have been tepid.  Significant headwinds in the form of persistently high oil prices, household deleveraging, weakened consumer confidence, and the Eurozone financial crisis have all combined to restrain growth prospects for 2012.
o       The macro outlook for 2012 is for a slow improvement, as impediments to growth are expected to gradually dissipate, with more positive cyclical trends kicking in later in the year.  Compared to the consensus forecast of 2.0 percent growth for 2012, a slightly faster growth rate of 2.4 percent is predicted.   This implies that the unemployment rate will remain at 8 percent or higher by the end of 2012.

Download the full report

The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online.