News

Posted On: 01/23/2012

Report forecasts rise in investment in equipment and software

Equipment Leasing & Finance Foundation

The Equipment Leasing & Finance Foundation has launched its 2012 Equipment Leasing & Finance U.S. Economic Outlook. The report, which is focused on the $628 billion equipment finance sector, forecasts equipment investment and capital spending in the United States, and evaluates the effects on various related and exogenous factors in play currently and into the foreseeable future. Overall, the report forecasts investment in equipment and software will grow by 9 percent in 2012.

The Foundation produced the 2012 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 2012.

Read an excerpt from the report:

• Credit market conditions are improving slowly as demand for financing grows and supply constraints gradually ease. However, the growth rate of investment in equipment and software is likely to remain moderate until demand puts more pressure on capacity. Based on our outlook for moderate economic growth in 2012, and the overhang of excess industrial capacity, we predict that investment in equipment & software will increase by 8% to 10% in 2012, compared to about 10.5% in 2011.
• Conditions remain favorable for financing versus leasing. Interest rates are near record lows and are likely to remain low through 2012. The Federal Reserve has begun to implement an Operation Twist to bring down long-term rates even further. Financial conditions remain volatile, driven by events in Europe, but overall conditions tend to favor purchasing over leasing.
• For the overall economy, recent revisions to U.S. GDP show that the 2008-09 recession was deeper and the recovery has been weaker than previously estimated. While investment has buoyed an otherwise weak economy, employment and consumer demand have been tepid. Significant headwinds in the form of persistently high oil prices, household deleveraging, weakened consumer confidence, and the Eurozone financial crisis have all combined to restrain growth prospects for 2012.
• Our macro outlook for 2012 is for a slow improvement, as we expect that impediments to growth will gradually dissipate and more positive cyclical trends will kick in later in the year. Compared to the consensus forecast of 2.0% growth for 2012, we predict slightly faster growth of 2.4%. This implies that the unemployment rate will remain at 8% or higher by the end of 2012.

Read the complete report