Equipment and Software Investment Growth Forecast At 5.9%
July 15, 2022
a strong rebound in Q1, overall equipment and software investment growth is
expected to slow significantly over the remainder of the year, though demand in
some end-use markets should remain healthy. The Q3 update to the 2022 Equipment
Leasing & Finance U.S. Economic Outlook, released today by the Equipment Leasing
& Finance Foundation, forecasts equipment and software investment growth of 5.9%
in 2022, while annualized GDP growth is expected to slow to 1.6% this year. The
Foundation’s report is focused on the nearly $1 trillion equipment leasing and
finance industry and highlights key trends in equipment investment, placing them
in the context of the broader U.S. economic climate.”
• Following negative GDP growth in Q1 downside risks continue to plague the U.S. economy. While the labor market is still strong and consumer spending has largely held up, the economic outlook has soured. Inflation remains the largest concern for businesses, and while the Fed is finally acting aggressively, it is likely to take several months before significant inflation abatement occurs. Another modest GDP contraction in Q2 is likely, and a looming recession in Europe means less demand for U.S. exports in Q3/Q4. Achieving the Fed’s desired “soft landing” will be challenging.
• Manufacturing output has remained strong despite a variety of headwinds facing the industry. Supply chain turmoil and high energy prices remain problematic, and rising borrowing costs are a growing concern. Still, the data point to significant pent-up demand waiting to be fulfilled should supply chains loosen later this year.
• The outlook for Main Street businesses over the remainder of the year has worsened. Small business sentiment has fallen as inflation has accelerated, and hiring has slowed. As the Fed pursues sharply tighter monetary policy to combat inflation, small businesses are likely to feel the effects of higher borrowing costs before they manifest elsewhere in the economy.
• The Fed is aggressively tightening monetary policy, which financial markets expect will continue in the coming months despite concerns of a growth pause or contraction.