U.S. Economic Outlook

2022 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

Equipment and Software Investment: Despite a slowdown in the fourth quarter, equipment and software investment expanded a robust 13.1% in 2021, the strongest growth in over a decade. Though investment performance was likely solid in Q1, the war in Ukraine and ensuing uncertainty have muddled the outlook for investment in several end-user markets.

Momentum Monitor: Momentum Monitor readings are showing signs of peaking and potential deceleration across several end-user markets. Most Momentum Monitor indices are somewhat weaker than they were 6–9 months ago, signaling slower investment growth in 2022.

Manufacturing Sector: Though manufacturing output held steady in early 2022, high energy prices and surging costs for other key inputs will likely weigh on activity later this year. Many of the supply chain issues that plagued markets in 2021 appear set to return due to the Russia- Ukraine
war and China’s response to COVID surges in major economic centers.

Small Businesses: Main Street firms are generally holding their own as of early April, and an end to most pandemic-era operating restrictions has improved consumer mobility and boosted demand. However, small businesses continue to contend with staff shortages and supply chain disruptions, which are each contributing to soaring inflation.

Fed Policy: As inflation rages, the Fed adopted a more hawkish posture in Q1. In addition to raising rates by 25bps in March, the Fed is expected to raise rates another 100bps by June and 200bps or more by the end of the year. Whether the Fed can rein in inflation without causing a sharp slowdown or recession is one of the biggest questions facing the economy this year.

U.S. Economy: Though an exceptionally strong labor market and robust housing growth has the U.S. economy on track for solid 2.8% growth in 2022, downside risks are mounting. Russia’s invasion of Ukraine and the resulting sanctions, economic turmoil, and supply chain shocks are all likely to contribute to inflation this year. High inflation and the potential for slowing growth have brought the term “stagflation” back into the economic discourse, and such a situation would complicate the Fed’s efforts to achieve its desired “soft landing.” Relatedly, higher mortgage rates may constrain growth in the housing sector during the second half of the year. All told, the economic outlook is cloudier than it was at the start of the year, though we still expect the equipment and software investment to expand at a moderate pace.