Equipment Leasing & Finance Industry Snapshot

1. April 2019 Equipment Leasing & Finance Industry Snapshot

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

3. GDP growth softened to an annualized rate of 2.2% in the fourth quarter of 2018, but the economy posted strong 2.9% growth for the year. Economy +2.2% Real GDP Growth Annualized Percent Change from Previous Quarter 30-Year Quarterly Average = 2.5% Source: U.S. Bureau of Economic Analysis, Keybridge LLC

4. Consumer spending and business investment were the major drivers of growth in the fourth quarter. Economy Tailwinds & Headwinds Contributions to GDP Growth by Sector Source: U.S. Bureau of Economic Analysis, Keybridge LLC

5. Top Economic Headwinds & Tailwinds ECONOMIC TAILWINDS Robust Wage Growth • Due to record low unemployment, employers are raising wages to attract scarce workers, driving nominal wages above 3% for the last eight months. • Despite a rare decline in consumer spending in December, low unemployment and strong wage growth should buoy consumer spending in 2019. • The Fed adopted a wait-and-see approach in January, holding interest rates steady in response to soft inflation and slowing global growth. • With most Fed officials expecting zero rate hikes in 2019, the stock market has rallied 15% year-to-date and debt servicing costs are expected to fall. Dovish Federal Reserve ECONOMIC HEADWINDS • China’s economy grew last year at its slowest pace since 1990, with weaknesses appearing across many sectors, including manufacturing and real estate. • A Chinese slowdown will decrease U.S. and European exports and lead to price declines for commodities such as oil and agricultural products. Softening Chinese Economy • The Eurozone economy has slowed sharply, most notably in Germany and Italy, in part due to weaker demand from China. • Trade ambiguity weighs on the Eurozone, as the Trump administration continues to threaten to impose auto tariffs and the UK’s Brexit strategy remains murky. Slowing European Economy • U.S. manufacturing output has declined in early 2019 amid a slowing global economy, a strong dollar, and trade frictions. • This softening points to continued weakness in the manufacturing sector this year, which will likely result in lower demand for certain types of machinery. U.S. Manufacturing Weakness Source: 2019 Equipment Leasing & Finance U.S. Economic Outlook

6. Additional Factors to Watch • The first quarter of 2019 saw multiple measures of business and consumer confidence decline (e.g., NFIB Small Business Optimism Index; Business Roundtable CEO Economic Outlook Index; Consumer Confidence Index). • While these measures remain at healthy levels and do not point to an imminent recession, they suggest that businesses may begin to scale back investment and hiring plans, and consumers may decrease discretionary spending compared to last year. Waning Confidence in the Economy? 1 Negotiated Settlement with China? • In late February President Trump calmed financial markets by delaying new tariffs on Chinese goods — but a deal has not yet been reached. • China remains unwilling to enact key changes that U.S. negotiators demand related to protecting intellectual property and prohibiting forced technology transfers. • However, both sides have strong political and economic incentives to end their trade dispute, and any agreement would be welcomed by export markets that have been suffering from the tariffs. 2 Source: Q3 2018 Equipment Leasing & Finance U.S. Economic Outlook

7. Projections for Key Economic Indicators Source: 2019 Equipment Leasing & Finance U.S. Economic Outlook

8. Growth in business investment bounced back in Q4, expanding at a 5.4% annualized rate after falling to a two-year low the previous quarter. Investment Business Investment Real Nonresidential Fixed Investment, Percent Change from Previous Quarter (SAAR) 5.4% Source: Macrobond Financial

9. The majority of equipment verticals should see positive investment growth in 2019, though momentum in several verticals appears to be fading. Investment Equipment & Software Investment Momentum Monitor (Equipment Vertical Performance Matrix) Source: 2019 Equipment Leasing & Finance U.S. Economic Outlook For more information on how to use the Momentum Monitors, see final slide.

10. Equipment and software investment is projected to expand by a moderate 4.5% in 2019. Investment Real Equipment & Software Investment Growth Q/Q Percent Change, SAAR Forecasts Source: Macrobond Financial; Projections from Keybridge

11. New business volume is off to a slow start in 2019. Bus. Health MLFI-25 New Business Volume Billion Dollars Through February*, investment is down 10.3% relative to year-ago levels *2018 data through October – projected through end of year using a simple year-to-date extrapolation. Source: ELFA MLFI-25

12. In February, new business volume declined 23% compared to year-ago levels, the most severe year-over-year decline since October 2009… Bus. Health -23% MLFI-25 New Business Volume Y/Y Percent Change Source: ELFA MLFI-25

13. …but the Foundation’s Monthly Confidence Index rose 3.7 points to 60.4 in March — suggesting that new business volume should bounce back. Bus. Health Monthly Confidence Index: Equipment Finance Industry (MCI-EFI) 60.4 Source: Macrobond

14. After a sharp increase in February, PayNet’s Small Business Lending Index (“SBLI”) remains near all-time highs and points to solid lending activity. Bus. Health PayNet Small Business Lending Index (SBLI) January 2005 = 100 146.9 Source: PayNet

15. 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

16. 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 to 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.