U.S. manufacturers and other businesses invested in equipment and
software at a slower than expected rate in the first half of 2013. But
the Equipment Leasing and Financing Foundation expects investment to
pick up in the second half.
The foundation forecasts steady growth in equipment investment over the next six months "due to reduced policy uncertainty and strong underlying economic fundamentals."
In a third-quarter update to its "2013 Equipment Leasing and Financing U.S. Economic Outlook," the foundation asserts that the U.S. economy is in its strongest position since the Great Recession, although "growth remains subpar."
"The economy continues to be buffeted by multiple headwinds, including high oil prices, weak global growth, fiscal consolidation and uncertainty about future fiscal reforms and other federal policies," the foundation said in a news release.
"However, the foundation reports that the underlying fundamental growth drivers of the U.S. economy are in better shape than in recent years."
The foundation attributes the expected second-half uptick to an improving housing market and auto sales, an energy "renaissance," reshoring of manufacturing, improving credit availability and rising employment.
"With the housing and energy sectors continuing to hold strong, we still expect the second half of the year to show growth, albeit more modestly than originally anticipated," said William Sutton, president of the foundation.
Among the trends noted in the foundation's third-quarter report:
- Investment in industrial equipment is expected to see average growth (1 percent to 3 percent year-over-year) through 2013.
- Investment in agricultural equipment is expected to average nearly flat growth on a year-over-year basis over the next three to six months.
- Investment in computers and software is expected to accelerate to more normal growth (5 percent to 8 percent) in the second half of the year.
- Investment in construction equipment continued growing rapidly, increasing 56 percent year-over-year in the first quarter, boosted by a recovering housing sector. Above-average investment growth is expected to continue through the rest of the year.
- Investment in medical equipment likely will continue to stagnate, with potential to pick up later in the year.
- Investment in transportation equipment slowed for the third consecutive quarter, but some improvement in its leading indicators suggests that growth will pick up slightly in the next three to six months.
For the year, the foundation expects investment in equipment and software to grow by 4.8 percent. That's a downward revision from its earlier forecast of 5.6 percent.