U.S. Economic Outlook

2020 Equipment Leasing & Finance U.S. Economic Outlook

This comprehensive report analyzes global and domestic trends impacting capital spending and economic growth in the coming year. It identifies signposts specific to the equipment finance industry and highlights key verticals, featured in the monthly Momentum Monitor, that identify turning points in their respective investment cycles. Each economic outlook is updated quarterly.

Report Summary - Equipment & Software Investment Outlook

This outlook acknowledges the substantial uncertainty stemming from both the epidemiology of COVID-19 and the U.S. economy’s response to social distancing measures. As such, projections for certain economic indicators are provided as ranges.

Equipment and Software Investment: E&S investment collapsed in Q1 and Q2 but bounced back in Q3 as the economy reopened. Looking ahead, while there is a great deal of uncertainty given the pandemic, annualized investment growth appears more likely than not to remain positive in the fourth quarter — though there will be an unusual amount of variability across sectors.

Momentum Monitor: Investment momentum readings are below the long-term average in all 12 verticals. While the majority of vertical, including software, trucks, medical equipment, are on the mend, others (e.g., construction, aircraft, and materials handling) remain weak.

Manufacturing Sector: The U.S. manufacturing sector has bounced back more quickly than expected. Though just over half of the 1.4 million lost manufacturing jobs have returned, job growth was stronger in September than in July and August, and other industry indicators suggest that the manufacturing sector will strengthen in late 2020 and early 2021.

Small Businesses: On Main Street, a fork has emerged in the road to recovery. The majority of small firms are managing to get by, for now. Some — perhaps 10-20% — have been minimally impacted by the recession and are thriving. But at the same time, a sizable and growing minority of firms are at heightened risk of closing their doors for the foreseeable future.

Fed Policy: The Federal Reserve has continued its massive quantitative easing program through 2020, and financial markets have responded favorably. Meanwhile, the FOMC has unveiled a new policy framework that will allow inflation to run above the usual 2% target for some time.

U.S. Economy: The contraction in Q2 was unprecedented, with high-contact service industries bearing the brunt of the damage. Although Q3 growth will set records, growth in Q4 and beyond is more uncertain. Labor market health and the availability of federal stimulus will be critical factors to watch, as will the pandemic’s trajectory — if another wave hits, growth will suffer.