The US Equipment Leasing & Finance Foundation (ELFF) has issued the Q2 update to its 2025 Economic Outlook which reveals that while the economy looked “generally solid” at the end of 2024, “the economic outlook has worsened” since the start of the year.

The ELFF revised its 2025 GDP forecast to 1.2% (down from 2.7%) and its equipment and software investment forecast to 2.8% (down from 4.7%). 

Despite the more pessimistic outlook, the Foundation believes a 2025 “growth pause” is more likely than a sustained downturn”.

“Still, the probability of a near-term recession has clearly risen,” ELFF states.

“Over the last three months…consumer spending has slowed, consumer and business sentiment have fallen sharply, inflation expectations are rising rapidly, and policy uncertainty has skyrocketed.

“The main culprit for this sea change is tariffs. Simply put, concerns about broad-based tariffs have upended the business community.”

The ELFF says that while tariffs are designed to encourage domestic manufacturing activity over time, and some industries are likely to benefit, including steel and aluminium manufacturers, the impacts are mostly negative.

“A vast body of evidence indicates that tariffs will harm far more US companies than they help, including many US manufacturers that rely on imports for inputs and raw materials,” ELFF continues. 

“Meanwhile, tariffs and their related uncertainty effects are expected to weigh on the economy, with most economic forecasters predicting slower or negative GDP growth, higher inflation, and lower household disposable income this year.”

Curiously the manufacturing sector showed what the ELFF describes as “noticeable improvement” in recent months with the ISM Purchasing Managers Index for Manufacturing and other measures for industrial activity strengthening.

However, business volumes remain flat year-on-year.

The Equipment Leasing & Finance Foundation (ELFF) produces independent research and other activities to advance the USD1.3 trillion equipment finance industry.