2025 Equipment Leasing & Finance U.S. Economic Outlook – Quarter 2
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Overview
Highlights from the 2025 Equipment Leasing & Finance U.S. Economic Outlook – Quarter 2 Update include:
Equipment finance industry: Tariffs are likely to harm the equipment finance industry, as they will significantly increase costs, and even domestically produced goods may experience price increases. Higher equipment prices could lead more end-users to explore financing options, and other policies pursued by the administration (e.g., lighter touch regulation) may offset some of the negative impacts. On balance, however, the impact is likely to be negative, as the tariff issue has coincided with a sharp increase in economic uncertainty, which often results in firms delaying major investment decisions until the outlook becomes clearer. The new tariff regime is likely to result in slower economic growth and a weaker environment for equipment and software investment for the remainder of the year.
U.S. economy: Tariffs and their related uncertainty effects are expected to weigh on the economy, with most economic forecasts predicting weak or negative GDP growth, higher inflation, and lower household disposable income this year.
Manufacturing: The manufacturing sector has exhibited noticeable improvement in recent months. Several measures of industrial activity have strengthened, including industrial production, capacity utilization, and the ISM Purchasing Managers Index for Manufacturing. Moreover, shipments and new orders of core capital goods have been generally positive in recent months, driven by strong growth in primary metals, computers, and electronics. These readings may reflect tariff-related pull-forward activity, and it is noteworthy that new business volume is roughly flat year-to-date while industry confidence has plummeted as measured by ELFA’s Capex Finance Index and ELFF’s Monthly Confidence Index, respectively.
Equipment and software investment: First-quarter investment in equipment and software is expected to bounce back after a poor Q4, in part due to a “pull-forward” effect as end-users attempt to front-run tariffs. However, uncertainty around trade policy and heightened concerns about the overall economic climate are expected to drag on investment growth over the next six months.