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Equipment Financing, Investment Expected to Accelerate, TD Economics

October 24, 2014, 07:00 AM
Filed Under: Economy

TD Economics announced the release of a special report detailing how equipment financing and investment is expected to accelerate over the next year and a half, due to improving cyclical and structural factors - "The Lost Years: U.S. Business Investment Poised for Better Days".

Highlights From the Report:

  • Outside of the stimulus-induced rebound immediately following the 2008-09 recession, investment in equipment and intellectual property products (IPP) has grown at a rate much slower than fundamentals would have predicted.  According to TD Economics estimates, this underperformance over the last two and half years has led to a cumulative shortfall of roughly half a trillion (inflation adjusted) dollars.
  • The underperformance in investment activity reflects a host of factors, mostly cyclical but also some structural. On the cyclical side, sluggish private sector growth, tight credit conditions, and heightened political and economic uncertainty all helped to undermine investment activity.
  • Moving forward, cyclical factors will offer more of a boost to investment than earlier in the recovery. However, technological advancements and lower capital investment requirements across industries have fundamentally changed firms' demand for certain types of equipment and software.  While stronger growth in both R&D and selected components of equipment will partially offset these forces, we are unlikely to see a sustained return to double-digit growth in business investment.
  • Although recent concerns surrounding the sustainability of the global recovery have surfaced, TD Economics continues to believe that trend growth for the American economy will be around 3%.  For equipment and IPP, this should support an average annual growth rate of roughly 6.5% over the next year and a half - a marked acceleration from the more sluggish pace experienced over the past two years.

To read the full report "The Lost Years: U.S. Business Investment Poised for Better Days", click here

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