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:

New Feature in the Momentum Monitor Report

This month, Keybridge and the Foundation are introducing a new feature to the U.S. Equipment & Software Investment Momentum Monitor. The “Momentum Monitor Sector Matrix” is a new data visualization that provides greater detail on our short-term investment expectations for each equipment vertical, both historically and relative to other verticals. Specifically, the Sector Matrix depicts each vertical on a 2 x 2 matrix based on both Recent Momentum (x-axis) and Historical Strength (y-axis). This capability makes it a better tool than the horizontal bar chart (sometimes called the “heat map”) that traditionally accompanied these reports, as the heat map only reflects the current reading relative to the long-term average. Additional detail on how to read and interpret the new Sector Matrix can be found on page 4 of this report.

The Sector Matrix and heat map will be published concurrently in the February and March Momentum Monitor reports, as well as the first quarterly update to the 2017 Equipment Leasing & Finance U.S. Economic Outlook (which will be published in April). Beginning in May, the heat map will no longer appear in either publication.

Momentum Monitor
Sector Matrix

The matrix above summarizes the current values of each of the 12 Equipment & Software Investment Momentum Indices based on two factors: Recent Momentum (x-axis) and Historical Strength (y-axis):

  • "Recent Momentum" represents the degree of an indicator's recent acceleration or deceleration in the past month relative to its average movement during the previous 3 months. Ratings closer to "0" represent an indicator that is rapidly decelerating, while ratings closer to "10" represent an indicator that is rapidly accelerating.
  • "Historical Strength" represents the strength or weakness of an indicator in the last 3 months relative to its typical level since 1999. Ratings closer to "0" represent an indicator that is weaker than average, while ratings closer to "10" represent an indicator that is stronger than average.

The matrix is comprised of four quadrants according to each vertical's recent momentum and historical strength readings. If a vertical is located in the top-left quadrant, its momentum reading is higher than average, but positive movement has slowed (and perhaps reversed) in recent months — suggesting that investment levels may fall over the next 1-2 quarters. Verticals located in the bottom-right quadrant, however, have momentum readings that are below average, but recent movement shows promise — suggesting that investment levels may rise over the next 1-2 quarters. This makes them potentially attractive targets for new leasing and finance opportunities.

Source: U.S. Equipment & Software Investment Momentum Monitor - February 2017

View the Momentum Monitor Heatmap

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 expanded at an annual rate of 9.6% in Q4 2016 and is down 7.8% from one year ago. The Agriculture Momentum Index rose from 95.5 (revised) in January to 96.4 in February. Cattle Exports jumped 85.4% to their highest level since December 2013, and Durable Goods Inventories rose 1.8%, the highest monthly increase since January 2013. Overall, the Index suggests little change in agricultural machinery investment growth over the next three to six months.
Construction Machinery
Investment in Construction Machinery fell at a 2.2% annual rate in Q4 2016 (the seventh straight decline), and is down 19.7% year-over-year. However, the Construction Momentum Index held steady at 91.3 from January to February. Real Personal Consumption Expenditures increased 0.3% in December, but Construction Machinery Shipments fell 6.5% in November. Overall, the Index points to improving construction machinery investment growth over the next two quarters.
Materials Handling Equipment
Investment in Materials Handling Equipment rose by a 3.3% annual rate in Q4 2016, and is up 2.5% year-over-year. The Materials Handling Momentum Index jumped from 77.4 (revised) in January to 82.8 in February. Machinery Wholesale Sales increased 1.3% in November, while Real Manufacturing & Trade Sales ticked up 0.1%. Overall, the Index suggests strengthening investment growth in materials handling equipment over the next three to six months.
Other Industrial Equipment
Investment in All Other Industrial Equipment increased by an 11.3% annual rate in Q4 2016, and is up 2.7% from a year ago. The Other Industrial Equipment Momentum Index slipped from 73.3 (revised) in January to 72.2 in February. In December, the Fed Funds Rate jumped 24 basis points to 0.55, but the ISM Chicago Price Paid Index increased 1.9%. Overall, the Index’s recent movement suggests little change in other industrial equipment investment growth over the next three to six months.
Medical Equipment
Investment in Medical Equipment expanded at a 9.1% annual rate in Q4 2016 and is up 1.8% year-over-year. The Medical Equipment Momentum Index held steady at 100.5 from January (revised) to February. The Monthly Household Estimate rose 0.6%, the largest month-on-month increase in two years, but New Orders of Non-Defense Capital Goods dropped 19.4%, the greatest decrease in 27 months. Overall, the Index continues to suggest the potential for faster medical investment growth over the next three to six months.
Mining & Oilfield Machinery
Investment in Mining & Oilfield Machinery declined at a 43.6% annual rate in Q4 2016 and is down 41.6% year-over-year. The Mining & Oilfield Machinery Momentum Index rose from 79.1 (revised) in January to 81.7 in February, its strongest reading in 20 months. In December, Industrial Production of Natural Gas jumped 12.0% after three months of decline, but Oil & Petroleum Product Imports fell 10.3%. Overall, the Index points to improved mining & oilfield investment growth over the next two quarters.
Aircraft
Investment in Aircraft rose at a 19.7% annual rate in Q4 2016 and remains down 9.4% on a year-over-year basis. The Aircraft Momentum Index ticked down from 89.3 (revised) in January to 88.0 in February. The ISM Non-Manufacturing New Orders Index increased 5.7%, but Overseas Tourism fell 5.7%, the fourth straight monthly decline. Overall, the Index continues to signal a decline in aircraft investment growth over the next three to six months.
Ships & Boats
Investment in Ships & Boats fell at an annual rate of 3.7% in Q4 2016 and is down 6.4% year-over-year. The Ships & Boats Momentum Index rose from 95.5 (revised) in January to 100.0 in February. The ISM Manufacturing Employment Index ticked up 0.6% in December (its fourth straight increase), but the Agricultural Product Trade Balance fell 10.3%. Overall, the Index points to improved investment growth in ships & boats over the next three to six months.
Railroad Equipment
Investment in Railroad Equipment decreased at a 25.1% annual rate in Q4 2016 but remains down 47.8% year-over-year. The Railroad Equipment Momentum Index fell from 104.7 (revised) in January to 101.9 in February. Although Mining Exports rose 7.6% in November to their highest level in two years, Coal Production fell 6.7% in December. Overall, the Index continues to point to a rebound in railroad equipment investment growth over the next two quarters.
Trucks
Investment in Trucks expanded at a 9.5% annual rate in Q4 2016 and is down 4.6% from year-ago levels (the first year-over-year decline since 2009). The Trucks Momentum Index decreased from 95.5 (revised) in January to 93.9 in February. In December, Housing Starts increased 11.3%. Overall, the Index continues to signal stronger investment growth in trucks over the next two quarters.
Computers
Investment in Computers fell at an annual rate of 8.2% in Q4 2016 but is up 0.8% year-over-year. The Computers Momentum Index rose from 90.1 in January to 91.2 in February. Appliance & Electronic Retail Sales surged 29.8% in November, the greatest increase in two years, while Computer & Electronic Industrial Production rose 0.9%. Overall, the Index points to strengthening computers investment growth over the next three to six months.
Software
Investment in Software rose by a 3.9% annual rate in Q4 2016, and is up 5.7% year-over-year. The Software Momentum Index slipped from 98.7 (revised) in January to 97.4 in February. Consumer Revolving Credit rose 1.1% in November, but was offset by a notable 7.0% increase in the Yen/Dollar Exchange Rate in December. Overall, the Index’s elevated position indicates that software investment growth should remain solid over the next two quarters, but momentum is decelerating.
Independent, forward-looking resources for the equipment finance industry.