Economic forecasts are often vague and not very helpful. Here is a short forecast affecting our business that I think is fairly balanced: Analysts are expecting overall equipment investment to stabilize or improve for the remaining year, buoyed largely in part by lower oil prices, according to the latest economic outlook by the Equipment Leasing & Finance Foundation.
Things had slowed down in the past six months and the primary view is that high oil prices played a significant role in the slowdown. While the effects of the euro crisis and the slowdown in emerging markets like China should not be underestimated, dropping oil prices should remove a major obstacle to growth in the coming months as consumers regain confidence and increase spending. The report points out that job creation slowed significantly when oil prices hit a peak in March. The report expects jobs to pick up eventually as prices remain low. The expectation is an 8% growth in equipment and software investment for 2013 despite investment slowing down to 3.5% in the first quarter of 2012 from 7.5% in late 2011.
The report also projects a bump in construction equipment investment later this year as the housing market improves. Financing in industrial equipment is also expected to remain steady as production is projected to increase in the long-term. Investment in computers and software is also expected to grow, but at a slower pace after companies invested heavily in equipment following the end of the recession in an effort to boost worker productivity. The outlook for the rest of the year remains “cautiously optimistic,” assuming that the EU is able to contain the financial crisis in Europe.