Momentum Monitor

Foundation-Keybridge Equipment & Software Investment Momentum Monitor

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor consists of indices for 12 equipment and software investment verticals. These indices are designed to identify turning points in their respective investment cycles with a 3 to 6 month lead time for the following verticals:

Equipment Vertical Momentum Relative to 10-Year Historical Average The chart above summarizes the current values of each of the 12 Equipment & Software Investment Momentum Indices relative to the index values for each quarter over the last 10 years. Verticals for which momentum is below the 10-year median are "decelerating," verticals for which momentum is near the 10-year median are "neutral," and verticals for which momentum is near the 10-year maximum are "accelerating." Note that the current momentum trend for each vertical may differ from the current investment volume. For example, a vertical for which the level of investment activity is low – but which is exhibiting signs of a comeback in the near future based on the momentum suggested by its leading indicators – will be labeled "accelerating" (and vice-versa).

Source: U.S. Equipment & Software Investment Momentum Monitor - June 2016

The U.S. Equipment and Investment Software Momentum Monitor is published every month but every third month it is included in the quarterly updates to the U.S. Economic Outlook. The Momentum Monitor is now available to download free of charge.

Vertical Markets

Business leaders require actionable forward-looking intelligence to make strategic decisions. The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor consists of indices for 12 equipment and software verticals . These indices identify key turning points in their respective investment cycles with a 3 to 6 months lead time. Equipment and software investment data comes from the Bureau of Economic Analysis (Nonresidential Private Fixed Investment, chained dollars) and is publicly available on BEA's website on a quarterly basis. The underlying Momentum Monitor data comes from other publicly available sources (published monthly), including BEA and the Census Bureau, and is used to calculate the Momentum Monitor indices.

Agriculture Machinery
Investment in Agricultural Machinery declined at an annual rate of 35.5% in Q1 2016, and is now down 12.7% from one year ago. The Agriculture Momentum Index slipped from 93.6 in May to 91.8 in June, a six-year low. Although Broiler Exports increased 1.3%, Inventories of Farm Machinery fell nearly 4% (the second straight drop) and Red Meat and Poultry Production decreased 6%. Overall, the Index’s recent movement and current low level suggest continued weak investment growth in the next three to six months.
Construction Machinery
Investment in Construction Machinery contracted at a 20.0% annual rate in Q1 2016 (the fourth straight decline), and is down 21.0% year-over-year, its sharpest drop since Q3 2013. The Construction Momentum Index increased from 80.0 (revised) in May to 82.9 in June. Housing Starts rebounded 6.6% in April and Consumer Sentiment rose 5.7 points. However, Residential Construction shed more than 1,000 jobs in May. Overall, the Index continues to indicate slow or negative investment growth over the next three to six months.
Materials Handling Equipment
Investment in Materials Handling Equipment fell at a 7.3% annual rate in Q1 2016, yet remains up 4.1% year-over-year. The Materials Handling Momentum Index dipped from 68.1 in May to 67.0 in June. The MNI-Chicago Business Barometer decreased 2.2% — the second consecutive decline — yet Industrial Production increased 0.7%, its largest monthly gain since November 2014. Overall, the Index suggests that while investment may begin to rebound, it will nonetheless remain relatively weak over the next three to six months.
Other Industrial Equipment
Investment in All Other Industrial Equipment slipped at a 2.0% annual rate in Q1 2016, but remains up 7.2% year-over-year. The Other Industrial Equipment Momentum Index ticked up from 54.4 (revised) in May — a nearly seven-year low — to 55.6 in June. Industrial Supplies Exports jumped 4% in April following four straight declines, while New Orders of Industrial Machinery increased by 3%. Overall, the Index’s low position continues to suggest that investment growth is likely to remain weak over the next three to six months.
Medical Equipment
Investment in Medical Equipment decreased at a 3.8% annual rate in Q1 2016 and is up 3.6% year-over-year — its slowest annual pace in two years. The Medical Equipment Momentum Index held steady at 97.2 (revised) from May to June. While Federal Health Outlays dropped nearly 17%, Social Security Disability Benefits increased 24% and New Orders of Electro-medical Devices rose 1.5%. Overall, the Index suggests no significant change medical equipment investment over the next three to six months.
Mining & Oilfield Machinery
Investment in Mining & Oilfield Machinery dropped at a 42.2% annual rate in Q1 2016 (the seventh straight decline) and is now down 42.6% year-over-year. The Mining & Oilfield Machinery Momentum Index declined from 63.8 (revised) in May to a new all-time low of 61.1 in June. Mining Support Employment dropped 2.1% in May and Shipments of Oil & Gas Field Machinery fell 22%, more than offsetting an increase in the WTI Spot Price. Overall, the Index points to continued weakness in mining & oilfield machinery investment over the next three to six months.
Aircraft
Investment in Aircraft contracted at a 30.9% annual rate in Q1 2016 and is down 16.9% on a year-over-year basis, the largest annual decline since 2009. The Aircraft Momentum Index eased from 83.1 (revised) in May to 81.9 in June — its lowest level since April 2013. Economic Policy Uncertainty increased more than 20%, and the ISM Non-Manufacturing Index for New Orders fell 5.7 points in May. Overall, the Index continues to suggest weakness in aircraft investment growth over the next three to six months.
Ships & Boats
Investment in Ships & Boats declined at an annual rate of 17.5% in Q1 2016, yet remains up 0.6% year-over-year. The Ships & Boats Momentum Index fell from 92.5 in May to 86.6. in June, its weakest reading since October 2014. At just 38,000 new jobs, Nonfarm Employment Growth slowed sharply in May, yet Raw Steel Production increased nearly 4%. Overall, the Index suggests a continued slowdown in ships & boats investment growth over the next three to six months.
Railroad Equipment
Investment in Railroad Equipment plummeted at an 81.8% annual rate in Q1 2016, and is now down 60.7% year-over-year, an all-time low. The Railroad Equipment Momentum Index increased from 71.7 (revised) in May to 74.7 in June. Following two declines, Machine Tool Orders surged 37% last month, and the ISM Manufacturing Index for Supplier Deliveries rose by 5.0 points in May. Overall, the Index’s extremely low position suggests continued negative growth in railroad equipment investment over the next three to six months.
Trucks
Investment in Trucks inched up at an 0.3% annual rate in Q1 2016 and is up 5.8% year-over-year — its slowest pace since Q4 2012. The Trucks Momentum Index rebounded slightly from 73.1 (revised) in May to 74.6 in June. The Unemployment Rate dipped to 4.7% in May (its lowest level since late 2007), and Housing Starts increased by nearly 7% in April. Overall, the Index’s recent movement and low position suggest that truck investment growth will remain slow relative to historical norms over the next three to six months.
Computers
Following a drop in Q4 2015, investment in Computers rebounded at an annual rate of 4.5% in Q1 2016 and is up 2.6% year-over-year. The Computers Momentum Index fell from 83.8 (revised) in May to 81.6 in June, its lowest level since September 2013. Although Consumer Expectations rose to a one-year high in May, Shipments of Communication Equipment declined nearly 3%. Overall, the Index points to a potential slowdown in computer investment growth over the next six months.
Software
Investment in Software grew at a 2.3% annual rate in Q1 2016, and is up 2.1% year-over-year. The Software Momentum Index inched up from 98.2 (revised) in May to 99.5 in June. The Richmond Fed Equipment Spending Survey plummeted 36%, and Exports of Travel Services dipped 2% — its first decline since October 2015. Overall, the Index’s elevated position and recent gains continue to suggest solid growth in software investment over the next three to six months.
Independent, forward-looking research for the equipment finance industry.