July 2019 Equipment Leasing Finance Industry Snapshot Data

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July 2019 Equipment Leasing & Finance Industry Snapshot

July 2019 Equipment Leasing & Finance Industry Snapshot

Data: Table of Contents 1. Overall Economy p. 3 2. Investment p. 8 3.

Data: Table of Contents 1. Overall Economy p. 3 2. Investment p. 8 3. Business Health p. 11 2

Economy GDP growth improved to 3. 1% in the first quarter, despite weakening economic

Economy GDP growth improved to 3. 1% in the first quarter, despite weakening economic fundamentals. Real GDP Growth Annualized Percent Change from Previous Quarter 5% 4. 2% 4% 3. 3% 30 -Year Quarterly Average = 2. 5% 3% +3. 1% 3. 4% 3. 3% 3. 0% 2. 3% 1. 9% 2% 1. 5% 2. 8% 1. 8% 2. 2% 1. 8% 1. 0% 1% 0. 4% 0% 2015. Q 1 2016. Q 1 Source: U. S. Bureau of Economic Analysis, Keybridge LLC 2017. Q 1 2018. Q 1 2019. Q 1 3

Economy Both consumer spending and investment disappointed in Q 1. Growth was driven by

Economy Both consumer spending and investment disappointed in Q 1. Growth was driven by net exports, inventories, and government spending. Tailwinds & Headwinds Contributions to GDP Growth by Sector Source: U. S. Bureau of Economic Analysis, Keybridge LLC 4

Top Economic Headwinds & Tailwinds ECONOMIC TAILWINDS Thriving Oil Sector Dovish Federal Reserve •

Top Economic Headwinds & Tailwinds ECONOMIC TAILWINDS Thriving Oil Sector Dovish Federal Reserve • U. S. crude oil production is at an all-time high, surpassing 12 million barrels per day to make the U. S. the world’s leading oil producer. • Despite price volatility, the break-even price for U. S. oil production continues to fall for new and existing pumps, encouraging new investment in the sector. • Fed officials have laid the groundwork for cutting rates in recent weeks, and the “marketimplied” probability of a July rate cut is 100%, • A cut would marginally ease financial stress on consumers and businesses but is unlikely to trigger a wholesale improvement in investment or spending. ECONOMIC HEADWINDS • Tensions among top U. S. trade partners remain high, despite recent progress (potentially) in China. • These disputes continue to dampen business confidence and are exacerbating an already uncertain economic climate. • Waning global demand, a strong dollar, and escalating trade disputes have contributed to a softening manufacturing sector. • Several metrics of manufacturing performance suggest industrial output will remain muted or decline further in the second half of the year. Trade Tensions Worsening U. S. Manufacturing Performance 5 Source: Q 3 2019 Equipment Leasing & Finance U. S. Economic Outlook

Additional Factors to Watch 1 China Stimulus Success? • China’s economy is expected to

Additional Factors to Watch 1 China Stimulus Success? • China’s economy is expected to grow at its slowest rate in 25 years due to a slowdown in manufacturing and investment compounded by heating trade tensions with the United States. • In response, Beijing escalated its stimulus efforts via new bank loans and bond issuances to fund public works projects. • The success of China’s stimulus efforts is critical to the world economy. 2 Diverging Small and Big Business Outlooks? • Measures of large business confidence are steadily declining (e. g. , Business Roundtable CEO Economic Outlook Index, Deloitte Global CFO Signals survey). • On the other hand, measures of small business confidence (e. g. , NFIB Small Business Optimism Index, Wells Fargo/Gallup Small Business Index, Pay. Net Small Business Lending Index) remain near all-time highs. • Which set of indicators is providing a truer signal of the core economy? 3 Potential for Consumer Slowdown? Source: Q 3 2019 Equipment Leasing & Finance U. S. Economic Outlook • Consumer spending comprises two-thirds of the economy, so a slowdown would have an outsize impact on U. S. growth. • Positive news: unemployment remains near a 50 -year low, real wage growth is relatively strong, and spending data have improved. • Negative news: consumer confidence plunged in June, real disposable income is sluggish, and consumer financial stress is building. 6

Projections for Key Economic Indicators Indicator 2017 2019 Quarterly Estimates 2018 2019 e Q

Projections for Key Economic Indicators Indicator 2017 2019 Quarterly Estimates 2018 2019 e Q 1 e Q 2 e Q 3 e Q 4 e Real GDP (SAAR %) 2. 2% 2. 9% 3. 1% 1. 6% 1. 5% 2. 5% Real Investment in Equipment & Software (SAAR %) 6. 9% 8. 1% 3. 4% 2. 0% 1. 7% 1. 5% 3. 9% Inflation (year-on-year %) 2. 1% 2. 4% 1. 6% 1. 7% 1. 8% 1. 7% Federal Funds Target Rate (upper bound, end of period) 1. 50% 2. 5% 2. 25% 10 -year Treasury Rate (end of period) 2. 40% 2. 70% 2. 40% 2. 00% Total Payroll Growth (thousands) +2, 153 +2, 679 +541 +512 +450 +425 +1908 Source: Q 3 2019 Equipment Leasing & Finance U. S. Economic Outlook 7

Investment Growth in business investment slowed in Q 1 to 4. 4% (annualized), as

Investment Growth in business investment slowed in Q 1 to 4. 4% (annualized), as the stimulative effects of the tax law continue to wane. Business Investment Real Nonresidential Fixed Investment, Percent Change from Previous Quarter (SAAR) 30% 20% 10% 4. 4% 0% -10% -20% -30% Q 1. 2009 Q 4. 2009 Q 3. 2010 Q 2. 2011 Q 1. 2012 Q 4. 2012 Q 3. 2013 Q 2. 2014 Q 1. 2015 Q 4. 2015 Q 3. 2016 Q 2. 2017 Q 1. 2018 Q 4. 2018 Source: Macrobond Financial 8

Investment While investment growth in most equipment verticals appear to be fading, some show

Investment While investment growth in most equipment verticals appear to be fading, some show potential promise, particularly software. Equipment & Software Investment Momentum Monitor (Equipment Vertical Performance Matrix) Source: Q 3 2019 Equipment Leasing & Finance U. S. Economic Outlook For more information on how to use the Momentum Monitors, see final slide. 9

Investment Equipment and software investment is projected to expand by a modest 3. 9%

Investment Equipment and software investment is projected to expand by a modest 3. 9% in 2019. Real Equipment & Software Investment Growth Q/Q Percent Change, SAAR 20% Forecasts 15% 9. 7% 10. 5%[VALUE] 6. 0% 5% [VALUE] 2. 5% 2. 0% 2. 4% 7. 4% 3. 4% 2. 0% 1. 7% 0% -1. 9% -5% -2. 7% -10% -15% 2015. Q 3 Source: Macrobond Financial; Projections from Keybridge 2016. Q 3 2017. Q 3 2018. Q 3 2019. Q 3 10

Bus. Health New business volume growth had a slow start in the beginning of

Bus. Health New business volume growth had a slow start in the beginning of the year but improved significantly in the 2 nd quarter. MLFI-25 New Business Volume Billion Dollars Through May*, investment is down 0. 3% relative to yearago levels $120 $100 $84. 6 $80 $96. 7 $97. 4 2015 $95. 1 $99. 5 $103. 6 $103. 3 2018 2019 $89. 0 $74. 0 $60. 6 $54. 3 $40 $20 $0 2009 2010 2011 2012 2013 *2019 data through May – projected through end of year using a simple year-to-date extrapolation. Source: ELFA MLFI-25 2016 2017 11

MLFI-25 New Business Volume Y/Y Percent Change 40% 30% +18% 20% 10% 0% -10%

MLFI-25 New Business Volume Y/Y Percent Change 40% 30% +18% 20% 10% 0% -10% -20% Source: ELFA MLFI-25 9 -1 M ay 9 b 1 Fe 8 ov -1 N 18 Au g- 8 -1 M ay 8 b 1 Fe 7 ov -1 N 17 Au g- 7 -1 M ay 7 b 1 Fe 6 ov -1 N 16 Au g- 6 -1 M ay 6 b 1 Fe ov -1 5 -30% N Bus. Health In May, new business volume grew at its fastest pace since February 2018 after significant Y/Y declines in the first quarter. 12

Bus. Health However, the Monthly Confidence Index dropped 6. 4 points to its lowest

Bus. Health However, the Monthly Confidence Index dropped 6. 4 points to its lowest level since July 2016, suggesting new business volume may remain weak. Monthly Confidence Index: Equipment Finance Industry (MCI-EFI) 80 70 60 50 52. 8 40 30 2012 Source: Macrobond 2013 2014 2015 2016 2017 2018 2019 13

Bus. Health The Pay. Net Small Business Lending Index eased slightly in May but

Bus. Health The Pay. Net Small Business Lending Index eased slightly in May but remains near an all-time high after jumping nearly 18 points in April. Pay. Net Small Business Lending Index (SBLI) 157. 2 January 2005 = 100 160 135 110 85 60 2008 Source: Pay. Net 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 14

EQUIPMENT LEASING & FINANCE FOUNDATION For more information on how you can use this

EQUIPMENT LEASING & FINANCE FOUNDATION For more information on how you can use this information in your business, download the recently-updated Applied Economics Handbook. Reports are available to download at www. store. leasefoundation. org 15

Notes *U. S. Equipment & Software Investment Momentum Monitor (Slide 9) • Published monthly,

Notes *U. S. Equipment & Software Investment Momentum Monitor (Slide 9) • Published monthly, the U. S. Equipment & Software Investment Momentum Monitor is a set of leading indicators for the equipment sector consisting of indices for various equipment and software investment verticals. These indices are designed to identify turning points in their respective investment cycles with a 3– 6 month lead time. • Each index is comprised of between 15 to 20 high-frequency indicators and is statistically optimized to signal turning points in the investment cycle without giving false readings of shifts in momentum. • The Momentum Monitor covers 12 equipment and software verticals as defined by the U. S. Department of Commerce Bureau of Economic Analysis. These verticals include aircraft, agriculture machinery, computers, construction machinery, materials handling equipment, medical equipment, mining and oilfield equipment, other industrial equipment, railroad equipment, ships and boats, software, and trucks. • “Recent Momentum" represents the degree of an indicator's recent acceleration or deceleration in the past month relative to its average movement during the previous 3 months. Ratings closer to "0" represent an indicator that is rapidly decelerating, while ratings closer to “ 10” represent an indicator that is rapidly accelerating. • "Historical Strength" represents the strength or weakness of an indicator in the past month relative to its typical level since 1999. Ratings closer to "0" represent an indicator that is weaker than average, while ratings closer to "10" represent an indicator that is stronger than average. 16