U.S. Economic Outlook

2018 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 key signposts specific to the equipment finance industry and features Momentum Monitors that identify turning points for 12 verticals in their respective investment cycles. Each economic outlook is updated quarterly.

Equipment & Software Investment Outlook:

Equipment and software investment growth slowed in the second quarter after surging at its fastest pace since 2015 in Q1, but investment levels remain healthy. The equipment finance industry appears to be on sound footing with solid growth prospects in the months ahead, though certain headwinds could disrupt the industry’s expansion, including rising interest rates and trade policy developments. Overall, investment in the majority of equipment verticals should remain solid through the remainder of 2018. Over the next three to six months:

  • Agricultural Machinery investment growth will likely slow;
  • Construction Machinery investment growth should hold steady;
  • Materials Handling Equipment investment growth should remain modest;
  • All Other Industrial Equipment investment growth is likely to continue to decelerate;
  • Medical Equipment investment growth will likely remain stable;
  • Mining & Oilfield Machinery investment growth may strengthen;
  • Aircraft investment growth should remain solid;
  • Ships & Boats investment growth is expected to accelerate;
  • Railroad Equipment investment growth should improve;
  • Trucks investment growth should remain solid;
  • Computers investment growth should remain solid; and
  • Software investment growth may soften.

U.S. Capital Investment & Credit Markets:

Capital spending has been a major driver of growth in the U.S. economy over the first half of the year, and elevated business confidence levels suggest that investment growth will continue at a solid pace through the rest of 2018. Credit market conditions remain healthy, with little change in both supply and demand from the previous quarter. Meanwhile, financial stress declined in the second quarter and remains historically low, indicating that the economy has more room to expand.

Overview of the U.S. Economy:

The U.S. economy continues to expand at a healthy pace, as consumer spending, business investment, government spending, and net exports are all contributing positively to growth. Although weak residential investment appears likely to keep GDP growth just short of the 3% annual growth target in 2018, most signs point to a continued moderate to strong economic expansion for the remainder of 2018 and early 2019. The major threats to U.S. economic growth over the next several months are international and political. Several key developing economies are showing signs of distress, and this weakness could spill over to the United States if current trends continue. In addition, major shifts in trade policy (particularly uncertainty surrounding the ongoing trade war with China) and the potential for increased political dysfunction threaten to take the air out of the U.S. economy.

Bottom Line for the Equipment Finance Sector:

Equipment and software investment should remain strong for the remainder of the year after posting healthy gains over the last 18 months, and new business volume growth should follow suit. Business and consumer confidence remain elevated and the labor market is strong and getting stronger. Despite downside risks to growth, the near-term outlook for the U.S. economy remains bright. Overall, we expect the economy to grow 2.9% in 2018 (up from 2.8% in our previous outlook), while we project that equipment and software investment will expand 7.9% (up from 7.0%).