U.S. Business Equipment Borrowings Surge in November

In a significant turnaround, U.S. businesses borrowed more than 8% year-over-year (y/y) to finance equipment investments in November, according to the Equipment Leasing and Finance Association (ELFA). This surge follows a 10% y/y decline in August and a 7% y/y decrease in March, indicating a notable shift in business sentiment and investment activity.

The rebound in equipment financing can be attributed to several factors. First, the Federal Reserve's decision to lower interest rates has made borrowing more affordable for businesses. The ELFA's confidence index for November stood at 62.5, up from 58.4 in October, suggesting a positive business outlook. This optimism, coupled with the Fed's rate cuts, likely encouraged businesses to invest in equipment.

Second, the improving economic outlook and increased consumer demand have played a role in driving the increase in equipment borrowings. The ELFA's Momentum Monitor, which tracks investment growth across 12 verticals, showed that seven verticals had momentum readings above their historical average in Q3 2024. This broad-based investment growth indicates that businesses are adapting to the current economic environment by investing in equipment to maintain or improve their competitiveness.



Lastly, the availability of credit and changes in lending policies have contributed to the rise in equipment financing. Credit approvals for U.S. companies in November were at 77%, unchanged from October, suggesting that lenders were more willing to extend credit. This, in turn, facilitated equipment financing for businesses.



In conclusion, the surge in U.S. business equipment borrowings in November reflects a broad-based investment growth across various industries, driven by the IT sector's growth and manufacturers' investment in productivity-enhancing technologies. This aligns with overall economic growth trends, suggesting that businesses are adapting to the current economic environment by investing in equipment to maintain or improve their competitiveness. As the economy continues to recover, businesses are likely to maintain their investment momentum, boding well for the equipment finance sector.