On July 20, 2016 at 1:00 PM (EDT), the Foundation hosted a webcast on the findings from the Q3 - 2016 Economic Outlook report. Our research partners from Keybridge presented the highlights from the Outlook report and tools from the Applied Economics Handbook to help you leverage data and make better business decisions. The Applied Economic Handbook and Q3 - Economic Outlook Report are available in the Foundation's Online Library by logging in with your ELFA username and password.
This comprehensive report analyzes global and domestic trends impacting capital spending and economic growth in the coming year. It identifies key signposts specific to the equipment finance industry and features Momentum Monitors that identify turning points for 12 verticals in their respective investment cycles. The outlooks are updated quarterly.
Modest equipment and software investment growth is expected to continue this year, as persistent headwinds undermine business spending and confidence. Specifically, continued slow growth in the global economy, a contraction in trade, political uncertainty, and low commodity prices have curtailed business investment for the past year and are likely to remain obstacles in the months ahead. Given recent data and current momentum, we expect equipment and software investment to increase by just 0.9% this year, a significant slowdown from last year�s 3.8% growth. Investment in most equipment and software verticals is likely to remain relatively weak through the end of the year.
U.S. Capital Investment & Credit Markets: Global uncertainty is weighing on credit demand and supply, but U.S. credit conditions remain at generally healthy levels. While financial stress has fallen and consumer demand for credit has increased considerably, uncertainty in the world economy and financial markets is contributing to weak business confidence and sluggish business investment. The Fed has made several decisions to delay interest rate hikes, citing global headwinds. However, we still expect the Fed to raise interest rates later this year, which may pull forward some investment and slightly expand margins for equipment finance firms.
Overview of the U.S. Economy: Supported by mostly decent fundamentals, we expect the U.S. economy to expand 2.2% in 2016, slightly slower than the pace of growth over the past two years. Consumer spending, driven by increases in real disposable income, will be a significant driver of growth in 2016, and tighter labor markets and solid residential housing gains are primed to provide an extra boost. However, weaknesses in the manufacturing and energy sectors are ongoing impediments to growth and will likely persist for the rest of the year. Thus far in 2016, predictions of an economic �pivot� from 2015 have proven to be accurate: manufacturing and exports have transitioned from growth drivers to drags, while consumption and housing activity continue to strengthen.