US Economy: No New Lease on Life

This fiscal cliff thing is really impacting outlooks for the new year. Even as Congress and the President seem to be moving closer at the negotiating table, industry groups are hedging their bets on 2013 results.

In its outlook for 2013, The Equipment Leasing & Finance Foundation, which is focused on the $725 billion equipment leasing and finance industry, projects equipment and software investment will grow, although at a below-average rate of 2.9%, hampered by weak demand and fiscal uncertainty. The report notes that the outlook for investment in 2013 is largely contingent on the resolution of the “fiscal cliff,” which could either continue to send negative shock waves through the economy or offer businesses encouragement. Even once the fiscal challenges are resolved, it will take time to work out the details and for businesses to regain confidence.

Looking forward into the third and fourth quarters of 2013, growth in equipment and software investment is expected to begin to regain momentum.


Highlights from the study include:
• Domestic political risk is the major concern on the radar for 2013. The report calls for the U.S. economy to grow at a rate of 2.4% once major fiscal issues are resolved. Without a smooth solution to current fiscal challenges, growth is forecast to fall significantly below 2%.

•Equipment and software investment took a significant hit in the third quarter of 2012, declining 2.7% (annualized rate) after a 4.8% increase in the second quarter.The data suggest that businesses have essentially “hit the pause button” on investment until there is a resolution to the “fiscal cliff.” Looking ahead to the second half of 2013, a strengthening housing sector and a reduction in political uncertainty could have an unlocking effect on business investment.


Trends in equipment investment include:
•Computers and software equipment investment is projected to stagnate for the next 3 to 6 months.

• Construction equipment investment is projected to average strong growth (about 15%) as the housing market maintains its forward momentum.

• Industrial equipment investment will grow but at a slower rate than recent quarters. Depending on the outcome of the fiscal cliff debate, manufacturing could drive stronger growth in the second half of 2013.

• Medical equipment investment growth is likely to range between -2% and 2% in the next 3 to 6 months.

• Growth in transportation equipment investment is likely to moderate, averaging about 10% over the next 3 to 6 months.


The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The report will be updated quarterly throughout 2013.


Download the full report at www.leasefoundation.org/IndRsrcs/EO/.