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.
Equipment and software investment growth in 2017 got off to a solid start in the first quarter and should continue to bounce back from a lackluster 2016, driven by overall improvements in business confidence and a more positive outlook for the industrial sector. The labor market remains strong, although wage growth continues to lag compared to prior economic recoveries. Improved global growth prospects and sustained business and consumer confidence should help to drive economic growth through the remainder of the year, but ongoing uncertainty regarding key federal policy initiatives present significant headwinds. The majority of equipment verticals are on an upswing and should expand moderately this year:
U.S. credit conditions are healthy, with virtually no change in supply from last quarter and a slight weakening in credit demand for both consumers and businesses. The Federal Reserve raised interest rates in June for the third time in 12 months and remains generally optimistic about the U.S. economy. However, weakening inflationary pressures and a shift in the Fed's focus toward shrinking its balance sheet make additional interest rate increases less likely during the second half of the year.
The U.S. economy remains on solid footing, despite a disappointing start to the year. Labor markets are historically strong, and although consumer spending was soft in the first quarter, most economists expect spending to improve. Business investment and manufacturing activity have been solid thus far in 2017 and should remain positive throughout the year. Government spending may have a slight negative effect on economic growth this year, while exports may improve due to global economic strength and a weaker dollar—provided the United States pursues pro-growth trade policies and avoids a trade war with China. While a strong surge is unlikely, the U.S. economy continues to be on track for moderate growth after a sluggish 2016.