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Crane Hot Line

Equipment Investment Expected to Slow Down, but Stay Positive

Oct. 15, 2019 - Equipment and software investment growth decelerated during the second consecutive quarter and is expected to moderate at 3.9% (unchanged from the Q3 Update of the Economic Outlook published in July), according to the Q4 Update to the 2019 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation. Overall, the economy is expected to expand 2.2%, down from the previous estimate of 2.5%, with growth driven primarily by consumer spending.

Jeffry D. Elliott, foundation chairman and senior managing director of Huntington Equipment Finance, said, “While we continue to expect both the overall economy and equipment and software investment to moderate this year, they should remain positive. Measures of consumer optimism have declined in recent months, though remain high by historical standards, reflecting a strong labor market and solid wage growth.”

Highlights from the report include:

•   Capital spending has been noticeably weaker in 2019 and may slow further over the remainder of the year due to heightened trade uncertainty and industrial sector weakness. However, credit market conditions remain healthy despite tightening credit conditions for commercial real estate and consumer loans and somewhat weaker demand for business loans.

•   U.S. economic growth decelerated to 2.0% in the second quarter, down from to 3.1% growth in Q1. Consumer spending improved significantly and is a key driver of economic growth. However, the manufacturing sector and business investment remain weak. Although robust consumer spending will likely remain a tailwind over the remainder of the year and the U.S. housing sector is showing signs of improvement, trade tensions with China, equity market volatility, and decelerating job creation are key potential risks as 2019 draws to a close.

The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, included in the report, tracks 12 equipment and software investment verticals. In addition, the Momentum Monitor Sector Matrix provides a customized data visualization of current values of each of the 12 verticals based on recent momentum and historical strength. Momentum readings are below the long-term historical average in eight of the 12 verticals. However, seven of the 12 verticals saw recent momentum accelerate in October over the next three to six months:

•   Construction machinery investment growth is likely to grow at a moderate pace;
•   Material handling equipment investment growth will likely remain weak;
•   All other industrial equipment investment growth is likely to remain modest;

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