After severe declines in equipment and software investment in Q1 and Q2 due to the effects of COVID-19 and the impact of social distancing measures, investment in equipment and software bounced back in Q3 as the U.S. economy began to reopen. While there is a great deal of uncertainty given the pandemic, annualized growth appears likely to remain positive in Q4, bringing the annual equipment and software investment growth forecast to the -4.9 to -6.4 percent range. The forecast for the broader U.S. economy in Q4 is less certain, though annual U.S. GDP growth for 2020 is forecast between -3.8 and -4.8 percent, according to the Q4 update to the 2020 Equipment Leasing & Finance U.S. Economic Outlook released today by the Equipment Leasing & Finance Foundation.
Scott Thacker, Foundation Chair and Chief Executive Officer of Ivory Consulting Corporation, said, “This update is arguably one of the most important Outlooks the Foundation has published. There has been much uncertainty about the actual economic performance in Q3 and also about how quickly the economy will rebound in Q4 and beyond. This Outlook will be highly useful in explaining Q3 results and in giving a hint about how the year will finish. I am encouraged to see equipment and software investment in Q4 being forecast as positive, with nine out of 12 verticals that the Foundation monitors showing improvement.”
Some highlights from the Q4 update include:
– Equipment and software investment is forecast to grow between 0 and 10 percent (annualized) in Q4.
– The contraction in the U.S. economy in Q2 was unprecedented, with high-contact service industries bearing the brunt of the damage. Although Q3 growth will set records, the unpredictable nature of the public health crisis is clouding Q4 GDP projections. Labor market health and the availability of federal stimulus will be critical factors to watch, as will the pandemic’s trajectory. Growth will suffer if another wave hits
– The U.S. manufacturing sector has bounced back more quickly than expected. Though a shade over half of the 1.4 million lost manufacturing jobs have returned and job growth was relatively modest in September, other industry indicators such as shipments and new orders suggest that the manufacturing sector will strengthen in late 2020 and early 2021.