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 - September 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 increased at an annual rate of 15.0% in Q2 2016, yet remains down 11.4% from one year ago. The Agriculture Momentum Index rose from 94.5 (revised) in August to 95.5 in September. Cattle Exports jumped 33.0% and Pesticides & Fertilizer Inventories ticked up 1.6%, while Red Meat & Poultry Production fell 8.1%. The Index's low position overall suggests continued slow growth in agricultural investment growth for the next three to six months, but a turnaround may be on the horizon.
Construction Machinery
Investment in Construction Machinery contracted at a 13.9% annual rate in Q2 2016 (the fifth straight decline), and is down 21.2% year-over-year. However, the Construction Momentum Index increased from 80.0 (revised) in August to 81.4 in September, a six-month high. In July, Multifamily Housing Permits jumped 4.3% and Non-Residential Construction expanded 1.7%, but Construction Machinery Shipments fell 7.3% to their lowest level since 2010. Overall, the Index points to subdued construction investment over the next three to six months.
Materials Handling Equipment
Investment in Materials Handling Equipment rose by a 10.0% annual rate in Q2 2016, and is up 4.2% year-over-year. The Materials Handling Momentum Index rose from 72.3 (revised) in August to 76.6 in September. Wholesale Machinery Sales increased 2.8% in June and the Economic Policy Uncertainty Index dropped by 35 points in August; however, the Dow Jones Industrials Balance fell 18.7%. Overall, the Index continues to point to stronger growth in materials handling investment over the next three to six months.
Other Industrial Equipment
Investment in All Other Industrial Equipment expanded by an 8.6% annual rate in Q2 2016, and is up 1.5% from one year ago. The Other Industrial Equipment Momentum Index jumped from 63.3 in August to 68.9 in September, its highest level in over a year. Copper Warehouse Stocks rebounded 44.1%, while the Industrial Production Indices for Durable Equipment and Machinery rose 0.8% and 0.7%, respectively. Overall, the Index's recent movement points to an investment pick-up in other industrial equipment over the next three to six months.
Medical Equipment
Investment in Medical Equipment increased at a 5.0% annual rate in Q2 2016 and is up 4.9% year-over-year. The Medical Equipment Momentum Index held steady at 97.8 from August to September. In July, Medicaid Personal Transfer Receipts ticked up 1.1%, while the Physicians' Services CPI jumped 13.3%. However, New Orders of Non-Defense Capital Goods fell 11.1% in June. Overall, the Index suggests stable investment growth in medical equipment over the next three to six months.
Mining & Oilfield Machinery
Investment in Mining & Oilfield Machinery plummeted at a 71.0% annual rate in Q2 2016 (its largest decline since 2002) and is now down 48.8% year-over-year. The Mining & Oilfield Machinery Momentum Index held steady at 64.6 from August (revised) to September. In August, the Oil Rig Count rose 8.8%, its third consecutive increase. However, Oil & Gas Field Machinery Shipments fell 4.3% and Mining Support Employment dropped to its lowest level since March 2010. Overall, the Index suggests continued negative growth in mining & oilfield machinery investment over the next three to six months.
Aircraft
Investment in Aircraft rose at a 64.5% annual rate in Q2 2016, yet remains down 17.7% on a year-over-year basis. The Aircraft Momentum Index jumped from 92.9 in August to 100.1 in September. New Orders of Defense Aircraft increased 20.9% in June and Exports of Civilian Aircraft rose 30.7% in July. Overall, the Index points to a rebound in aircraft investment growth over the next three to six months.
Ships & Boats
Investment in Ships & Boats increased at an annual rate of 14.6% in Q2 2016, yet remains down 17.4% year-over-year. The Ships & Boats Momentum Index increased from 80.6 (revised) in August to 82.1 in September. Industrial Production for Consumer Energy Products rose 2.2%, but was offset by a 7.9% decline in Mobile Home Shipments, the largest single month drop since December 2011. Despite this month's uptick, the Index points to slow or negative growth in ships & boats investment over the next three to six months.
Railroad Equipment
Investment in Railroad Equipment plunged at a 57.1% annual rate in Q2 2016, its third straight decline, and is now down 36.6% year-over-year. The Railroad Equipment Momentum Index climbed from 83.8 (revised) in August to 89.5 in September. In July, Coal Production increased 14.1%, its third straight month of robust growth, but the ISM Manufacturing Employment Index fell 1.1 points to 48.3. Overall, the Index points to a revival in railroad equipment investment over the next two quarters.
Trucks
Investment in Trucks fell at a 13.0% annual rate in Q2 2016 but is up 3.7% year-over-year. The Trucks Momentum Index surged from 85.1 in August to 94.0 in September, its strongest reading since November 2015. Industrial Production for Non-Durable Energy Materials expanded 1.7% in July, but the ISM Manufacturing Index fell 3.2 points, its largest decline since January 2014. Overall, the Index suggests that investment in trucks will bounce back over the next three to six months.
Computers
Investment in Computers grew at an annual rate of 11.9% in Q2 2016, yet remains down 0.6% year-over-year. The Computers Momentum Index rose from 77.7 (revised) in August to 81.1 in September. While the Morgan Stanley High Tech 35 Index jumped 113 points, Shipments of Communication Equipment fell 4.9%. Despite this month's uptick, the Index continues to suggest that investment growth in computers may slow over the next two quarters.
Software
Investment in Software rose by a 4.3% annual rate in Q2 2016, and is up 3.5% year-over-year. The Software Momentum Index dropped from 100.3 (revised) in August to 96.3 in September. The Survey on Equipment & Software Spending plummeted 57.1%, but the Yen/Dollar Exchange Rate declined 2.7% in July, marking the eighth consecutive month of Dollar depreciation against the Yen. Overall, the Index's elevated position signals continued growth in software investment, but its recent movement is worth monitoring in the months ahead.
Independent, forward-looking research for the equipment finance industry.