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Oct 4, 2012 1:37 PM

Projected growth in equipment and  software investment for 2012 is expected to be 6.7%, down from the 2011  growth rate of 11.0%, according to a new quarterly update of the 2012 Equipment Leasing  & Finance U.S. Economic Outlook compiled by the Equipment Leasing & Finance  Foundation.

According to the fourth quarter outlook, growth  in equipment and software investment slowed to an annualized rate of 4.8% in the  second quarter, down from 5.4% in the first quarter. The report finds that the  recent slowdown in durable goods shipments indicates that equipment investment  continued to lose momentum in the third quarter,  However, it should remain positive—albeit at  a decelerated pace compared to 2011—through the rest of 2012.

Key findings include:

 
• The U.S.       economy continues to grow at an anemic pace, evidenced by       weaker-than-expected job creation in the past three months.  Although       growth in equipment and software investment slowed to an annualized rate       of 4.8% in the second quarter from 5.4%in Q1, it continues to be a driver       of growth in an otherwise subdued economy.  
 
• Looking ahead to 2013,       natural cyclical forces—particularly housing—should gain more traction and       drive growth.  However, some fiscal tightening is expected to       counterbalance these positive trends. The revised projection for 2013       growth in equipment and software investment is 4.5%, down from the       original forecast of 8%.

 
• Trends  in equipment investment include:
 
   
• Agriculture  equipment investment is likely to decline by 5-10% in the next three to six  months.
   
• Computer  and software equipment investment is projected to grow at a relatively slow  pace of 1-3%.
   
• Construction  equipment investment is projected to continue to grow at a strong pace (15% or  more) as the housing market rebounds.
   
• Industrial  equipment investment should grow at a moderate clip of 5-9% in Q4.
   
• Medical  equipment is likely to grow but at a slow pace of 1-2 percent.
   
• Growth  in transportation equipment investment is likely to moderate, but should stay  above 15% over the next 3 to 6 months.
 

 
• Credit  market conditions remain in flux and highly reactive to Federal Reserve policy  and the latest events in Europe.  It is  expected that tensions in global credit markets will ease somewhat, and U.S. interest  rates should marginally increase in 2013 as the ‘flight to quality” trend  slowly unwinds. 
 
• The  U.S. economy slowed in the second quarter of 2012 to an annualized growth rate  of 1.3%, down from 2% in Q1 2012. Overall, the macro outlook for 2012 has not  changed materially. Real GDP growth is holding at 2.2 percent, and inflation  expectations dropped from 2.3% to 2.1%.

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 2013 Equipment Leasing  & Finance U.S. Economic Outlook Annual Report is scheduled for publication  in December 2012.

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