U.S. Economic Outlook

2021 Equipment Leasing & Finance U.S. Economic Outlook Q4 Update

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: E&S investment rose again in Q2 and is well above its pre-pandemic level. Business investment has remained strong despite emerging headwinds in the economy, though these headwinds could begin to weigh on investment later this year.

Momentum Monitor: Momentum monitor readings are now above the long-term average in all 12 verticals tracked by the Foundation’s Momentum Monitors, though several verticals have begun to show signs of deceleration as broader economic activity slows.

Manufacturing Sector: The manufacturing sector continues to face historically high levels of demand, although growth decelerated over the last quarter. Meanwhile, U.S. industrial output has been constrained by ongoing supply chain shortages and high input prices.

Small Businesses: Business prospects for Main Street have been tempered somewhat since the beginning of the summer as a resurgence of COVID-19 has reduced consumer mobility, spending, and confidence. Small businesses are also contending with labor shortages, supply chain delays, and inflationary pressures. However, firms are better equipped to manage these headwinds than they were last year thanks to healthy lending activity and a slow but steady rise in vaccination rates.

Fed Policy: Federal Reserve officials largely maintain that ongoing inflationary pressures are mostly temporary. However, officials have signaled that the Fed is ready to begin “tapering” its asset purchases soon, which would translate to tighter financial conditions.

U.S. Economy: America reopened for business this spring and early summer as vaccination rates rose and infections slowed. However, the spread of the Delta variant has dampened activity in some areas and has likely slowed economic growth significantly in Q3. Consumer confidence took a hit as people grew less comfortable with in-person activity, and business confidence has been dinged by inflationary pressures and supply chain issues. On the positive side, consumers have accumulated significant savings over the pandemic that should provide a financial cushion, for now. Factors to watch for the rest-of-year outlook include concerns of persistently high inflation, uncertainty surrounding fiscal policy, the potential for tighter financial conditions that could impact equity markets, and the trajectory of the pandemic.