Leasing and Finance Outlook Bright for 2012

Investment in equipment and software will grow by 9 percent in 2012, according to the Equipment Leasing & Finance Foundation’s 2012 Equipment Leasing & Finance U.S. Economic Outlook.This sector has grown steadily for eight straight quarters, the report notes, and although growth will moderate slightly, it will remain positive overall.

The report also concludes that:

Transportation equipment investment should remain solidly positive, but is unlikely to maintain the rapid growth rates of 2011.

Construction equipment investment is likely to slow in the immediate near term, but could be buoyed by the energy and housing sectors later in 2012.

Industrial equipment investment will likely be hampered by macro-trends, which may cause some deceleration in growth from what appears to be a recent peak in the growth rate.

Medical equipment is on watch for a leveling-off in investment spending. Investment growth rates, while positive, have softened for six straight quarters and could bottom out in late 2012. Still, near-normal growth is anticipated in the next 3-6 months.

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 an outlook for moderate economic growth in 2012, and the overhang of excess industrial capacity, investment in equipment and software is expected to increase by 8-10 percent in 2012, compared to about 10.5 percent in 2011.

For the overall economy, recent revisions to U.S. gross domestic product (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.

The macro outlook for 2012 is for a slow improvement, as impediments to growth are expected to gradually dissipate, with more positive cyclical trends kicking in later in the year. Compared to the consensus forecast of 2.0 percent growth for 2012, a slightly faster growth rate of 2.4 percent is predicted. This implies that the unemployment rate will remain at 8 percent or higher by the end of 2012.

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