Equipment Leasing & Finance Industry Confidence Improves in August

WASHINGTON, DC (August 18, 2016) – The Equipment Leasing & Finance Foundation (the Foundation) released the August 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 is 54.8, an increase from the July index of 52.5.

When asked about the outlook for the future, MCI-EFI survey respondent Adam D. Warner, President, Key Equipment Finance, said, “There seems to be a general slowdown in capital asset acquisitions. There is enough negative overhang and fallout from the U.S. presidential campaign combined with continued concerns about Europe and China that have businesses unsure about investments in growth.”  

August 2016 Survey Results:

The overall MCI-EFI is 54.8, an increase from the July index of 52.5.

•   When asked to assess their business conditions over the next four months, 10.0 percent of executives responding said they believe business conditions will improve over the next four months, a decrease from 12.1 percent in July.  80.0 percent of respondents believe business conditions will remain the same over the next four months, an increase from 75.8 percent in July.  10.0 percent believe business conditions will worsen, a decrease from 12.1 percent the previous month.

•   13.3 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 12.1 percent in July.  70.0 percent believe demand will “remain the same” during the same four-month time period, up from 57.6 percent the previous month.  16.7 percent believe demand will decline, a decrease from 30.3 percent who believed so in July.

•   13.3 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 15.2 percent in July.  80.0 percent of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 78.8 percent the previous month.  6.7 percent expect “less” access to capital, an increase from 6.1 percent last month.

•   When asked, 40.0 percent of the executives report they expect to hire more employees over the next four months, an increase from 30.3 percent in July.  50.0 percent expect no change in headcount over the next four months, a decrease from 63.6 percent last month.  10.0 percent expect to hire fewer employees, up from 6.1 percent in July.

•   None of the leadership evaluates the current U.S. economy as “excellent,” unchanged from last month.  90.0 percent of the leadership evaluate the current U.S. economy as “fair,” a decrease from 100 percent last month. 10 percent evaluate it as “poor,” an increase from none in July.

•   None of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 3.0 percent in July.  96.7 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 78.8 percent the previous month. 3.3 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 18.2 percent who believed so last month.

•   In August, 40.0 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 36.4 percent in July.  60.0 percent believe there will be “no change” in business development spending, relatively unchanged from 60.6 percent the previous month.  None believe there will be a decrease in spending, a decrease from 3.0 percent who believed so last month.

August 2016 MCI-EFI Survey Comments from Industry Executive Leadership:

Bank, Small Ticket
“I am concerned about slow to no growth in an election year with increasing delinquency and bad debt. Consolidation brings opportunities on a small scale and is challenging on a large scale.” David Normandin, Managing Director, Commercial Finance Group, Banc of California

Independent, Middle Ticket
“While the employment numbers look positive, the recent GDP number seems anemic. Growth in new business volumes has softened and there is a slight uptick in delinquencies, despite aggressive collections efforts. The outlook is unclear.” William H. Besgen, Senior Advisor, Vice Chairman Emeritus, Hitachi Capital America Corp.

Bank, Middle Ticket
“We continue to see a pull-back in capital investment for the sectors we serve, especially the cash grain sector.  We continue to see opportunities with solar and facility-based financing for those customers looking to take advantage of tax credits and growth opportunities for industries not impacted by low commodity prices.”  Michael Romanowski, President, Farm Credit Leasing Services Corporation

Bank, Large Ticket
Though the market remains competitive, we continue to see financing opportunities from our client base. Concerns over the outcome of the elections could impact spending in the short term.” Thomas Partridge, President, Fifth Third Equipment Finance

For more information, visit the Foundation.