2024 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 and Software Investment: E&S investment was sluggish in Q3, rising 0.5% (annualized) after 7.0% growth in Q2. Elevated interest rates will continue to drag on investment in 2024, and the climate for near-term investment is still relatively weak.
Momentum Monitor: The latest Momentum Monitor reading suggests that equipment and software investment growth is likely to remain subdued across most equipment verticals over the next two quarters. However, readings in most verticals have improved somewhat in recent months, offering a level of cautious optimism for investment during the second half of the year.
Manufacturing: After a subpar year in which the manufacturing sector stagnated, many of the same challenges U.S. manufacturers have faced are likely to persist in 2024. High interest rates continue to weigh on capex plans, and while the U.S. economy is unlikely to experience the same pace of growth, global demand also appears to be soft. Even so, a continued influx of federal dollars should boost certain key industries, including semiconductors and green energy, and benefit equipment verticals that serve these industries.
Small Businesses: Main Street has benefitted from strong consumer spending over the last two years, outperforming expectations. However, small business owners are increasingly pessimistic about near-term sales revenue amid worries that consumers may be finally starting to pull back.
Fed Policy: The Federal Reserve held interest rates steady at its most recent meeting, with rates at 5.25–5.50%. Inflation has fallen significantly over the last six months, and if economic growth weakens significantly in late 2023 and early 2024 as expected, Fed officials may feel pressure to begin cutting rates in the spring, particularly if inflation remains in the 3% range.
U.S. Economy: The U.S. economy likely averted a recession in 2023, as the labor market proved surprisingly resilient to higher interest rates and consumers continued to spend. The Fed’s ability to bring inflation to more acceptable levels without triggering widespread job loss has been a welcome surprise, and the combination of a healthy labor market, cooling inflation, and improved consumer sentiment has left us more confident that a “soft landing” scenario is now more likely than not. That said, it is still premature to declare victory, as high government expenditures contributed much more to GDP in 2023 than they will in 2024, consumer spending may soften amid rising financial stress, and global economic conditions remain weak. A recession during the first half of 2024 is still possible, but a soft landing is now our base case.
February 22, 2024
February 5, 2024
January 29, 2024