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: Equipment investment expanded in Q1 after contracting for three quarters in 2023. Transportation equipment investment remains in negative territory, while information processing equipment and software investment lead growth, driven in part by AI-related investment. Industrial equipment also expanded at a healthy rate.
Momentum Monitor: Though elevated interest rates continue to weigh on investment growth in some industries, seven of 12 tracked verticals have momentum readings above their historical average, and seven verticals also exhibit recent acceleration. Overall, investment growth should remain remain positive in 2024, expanding at a moderate but not spectacular clip.
Manufacturing: The manufacturing sector is expected to remain soft over the next few months. After cresting briefly into expansionary territory in March, ISM’s Manufacturing PMI (a key indicator of sector performance) has declined for three consecutive months. Industrial production held steady, but many manufacturers appear hesitant to invest in capital expenditures and inventories given the current business environment.
Small Businesses: Optimism on Main Street has improved marginally as inflation has eased. Small business owners are still feeling the pinch of high interest rates and inflation, however, as rents rise 12% Y/Y and consumer demand slows. In line with overall economic growth, Main Street economic activity is expected to expand modestly over the remainder of the year.
Fed Policy: Inflation cooled in Q2, a welcome development after multiple too-hot-for-comfort readings earlier in the year. While it’s too soon to declare victory, inflation should remain subdued over the next few months given falling producer prices and the increased prevalence of price discounts. As a result, we expect the Fed to cut rates twice in 2024.
U.S. Economy: At the year’s midway point, the U.S. economy is a mixed bag. On the positive side, the labor market remains healthy, wage growth is solid, and the Fed continues to make progress against inflation. At the same time, consumer demand is slowing for several reasons, including weaker disposable income growth, “inflation fatigue,” and rising financial stress. Business activity also appears to be slowing, both in the manufacturing sector as well as service sector industries as consumers tighten their belts. Overall, a recession in 2024 remains unlikely, but a return to strong economic growth is also unlikely. A soft landing looks like the best bet.