Equipment Leasing & Finance Industry Confidence Eases Again in June

WASHINGTON (June 21, 2016) – The Equipment Leasing & Finance Foundation (the Foundation) releases the June 2016 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market eased for the second consecutive month to 52.3 from the May index of 55.1. Uncertainty about the November election and its impact on the U.S. economy were among respondents’ concerns.

When asked about the outlook for the future, MCI-EFI survey respondent Robert Boyer, president, Susquehanna Commercial Finance, said, “Increased consumer spending and confidence indications create some level of optimism, but 2016 capital investment will be heavily impacted by the uncertainty caused by the November election.”
 
June 2016 Survey Results:
The overall MCI-EFI is 52.3, a decrease from the May index of 55.1.

•   When asked to assess their business conditions over the next 4 months, 9.4 percent of executives responding said they believe business conditions will improve over the next 4 months, a decrease from 16.1 percent in May. 68.8 percent of respondents believe business conditions will remain the same over the next 4 months, an increase from 67.7 percent in May. 21.9 percent believe business conditions will worsen, an increase from 16.1 percent the previous month.

•   6.3 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next 4 months, a decrease from 16.1 percent in May. 71.9 percent believe demand will “remain the same” during the same, 4-month time period, up from 61.3 percent the previous month. 21.9 percent believe demand will decline, relatively unchanged from 22.6 percent who believed so in May.

•   15.6 percent of executives expect more access to capital to fund equipment acquisitions over the next 4 months, a decrease from 19.4 percent in May. 81.3 percent of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 74.2 percent the previous month. 3.1 percent expect “less” access to capital, a decrease from 6.5 percent last month.

•   When asked, 37.5 percent of the executives report they expect to hire more employees over the next 4 months, a decrease from 48.4 percent in May. 56.3 percent expect no change in headcount over the next 4 months, an increase from 48.4 percent last month. 6.3 percent expect to hire fewer employees, an increase from 3.2 percent in May.

•   None of the leadership evaluates the current United States economy as “excellent,” unchanged from last month.  96.9 percent of the leadership evaluate the current U.S. economy as “fair”  and 3.1 percent rate it as “poor,” both unchanged from May.

•   6.5 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next 6 months, unchanged from May. 75.0 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next 6 months, an increase from 64.5 percent the previous month. 18.8 percent believe economic conditions in the U.S. will worsen over the next 6 months, a decrease from 29.0 percent who believed so last month.

•   In June, 31.3 percent of respondents indicate they believe their company will increase spending on business development activities during the next 6 months, a decrease from 38.7 percent in May. 68.8 percent believe there will be “no change” in business development spending, an increase from 58.1 percent the previous month. None believe there will be a decrease in spending, a decrease from 3.2 percent who believed so last month.

June 2016 MCI-EFI Survey Comments from Industry Executive Leadership:
Independent, Small Ticket
“Rates remain low, capital is abundant, and credit appetites appear to be widening—all good news for would-be borrowers. On the other hand, we are experiencing a political environment that seems circus-like and a nation that is being rocked by threats of terrorism. We do not expect to see small and mid-size businesses choosing to expand and invest with certainty. I believe the rest of this year will see a reasonable flow of business, but I’m not expecting a strong close to 2016.” Valerie Hayes Jester, president, Brandywine Capital Associates Inc.

Bank, Small Ticket
“Abundant liquidity, which increases competition and lowers spreads, is still the biggest story in our industry.  The presidential election will keep a damper on economic expansion through the remainder of the year.” Paul Menzel, president and CEO, Financial Pacific Leasing LLC

Bank, Middle Ticket
“Year to date, the equipment finance industry has seen substantial decreases in new business activity compared to 2015. Given the choppy performance of the U.S. economy and political uncertainty I believe the balance of 2016 will be similar to the first half; not an optimistic outlook for the industry.” Thomas Jaschik, president, BB&T Equipment Finance

For more information, visit the Foundation.