The Foundation Releases MCI-EFI Regarding Business Conditions and Expectations

The Equipment Leasing & Finance Foundation (the Foundation) released the February 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $903 billion equipment finance sector. Overall, confidence in the equipment finance market is 66.3, a slight increase from the three-year high level reached by the January index of 66.1.

When asked about the outlook for the future, MCI-EFI survey respondent William Verhelle, chief executive officer, First American Equipment Finance, a City National Bank company, says, “The economy continues to improve. First American is seeing increased equipment acquisition activity among the large corporate borrowers we serve. We are optimistic that lower energy costs, if they remain at current low levels, will drive increased U.S. economic activity in the second half of 2015. We are more optimistic about the U.S. economy today than we have been at any time during the past six years.”

February 2015 Survey Results:
The overall MCI-EFI is 66.3, a slight increase from the January index of 66.1.

  • When asked to assess their business conditions over the next four months, 30.3 percent of executives responding said they believe business conditions will improve over the next four months, up from 23.3 percent in January. 63.6 percent of respondents believe business conditions will remain the same over the next four months, down from 76.7 percent in January. 6.1 percent believe business conditions will worsen, up from none who believed so the previous month.
  • 42.4 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 20 percent in January. 51.5 percent believe demand will “remain the same” during the same four-month time period, down from 80 percent the previous month. 6.1 percent believe demand will decline, up from none in January.
  • 27.3 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3 percent in January. 72.7 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 66.7 percent in January. None expect “less” access to capital, unchanged from the previous month.
  • When asked, 39.4 percent of the executives reported they expect to hire more employees over the next four months, a decrease from 50 percent in January. 57.6 percent expect no change in headcount over the next four months, up from 50 percent last month. 3 percent expect to hire fewer employees, up from none who expected fewer in January.
  • 6.1 percent of the leadership evaluate the current U.S. economy as “excellent,” up from 3 percent last month. 90.9 percent of the leadership evaluate the current U.S. economy as “fair,” down from 97 percent in January. 3 percent rate it as “poor,” up from none the previous month.
  • 45.4 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 43.3 percent who believed so in January. 54.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 56.7 percent in January. None believe economic conditions in the U.S. will worsen over the next six months, unchanged from last month.
  • In February, 48.5 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 50 percent in January. 51.5 percent believe there will be “no change” in business development spending, an increase from 50 percent last month. None believe there will be a decrease in spending, unchanged from last month.

February 2015 MCI-EFI survey comments from industry executive leadership:

  • Independent, Small Ticket
    “Demand remains moderate and competition is strong. We remain bullish for 2015 as we expand channels and products. We are planning on muted GDP so we are focused on making our own opportunities versus waiting for the general economy to expand.” David Schaefer, CEO, Mintaka Financial LLC

  • Bank, Small Ticket
    “Things just seem to be better. Gas prices and unemployment are headed in the right direction. I am concerned about the negative effect of lower gas prices, such as, higher fail rates of energy loans and energy stock value.” Kenneth Collins, CEO, Susquehanna Commercial Finance Inc.

  • Bank, Middle Ticket
    “I see continued strength in the transportation segment of the economy. That segment of our business will remain strong. The opportunities in oil and gas have substantially declined. I expect the decline to depress the volume of business during 2015. 2015 will be a mixed year with some industries doing well and others in decline.” Elaine Temple, president, BancorpSouth Equipment Finance

  • Bank, Middle Ticket
    “All signs have been pointing to a ‘break-out’ year in 2015. However, investment in capital assets continues to be sporadic. Companies continue to be cautious in expanding their production capacity. Let’s hope the economists are correct in their predictions for 2015.” Thomas Jaschik, president, BB&T Equipment Finance

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Because the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

  • 1. Current business conditions
  • 2. Expected product demand during the next four months
  • 3. Access to capital during the next four months
  • 4. Future employment conditions
  • 5. Evaluation of the current U.S. economy
  • 6. U.S. economic conditions during the next six months
  • 7. Business development spending expectations
  • 8. Open-ended question for comments

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

Confidence in Equipment Finance Sector Is Steady

The Equipment Leasing & Finance Foundation (the Foundation) released the December 2014 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 $903 billion equipment finance sector. Overall, confidence in the equipment finance market is 63.4, steady with the November index of 64.2.

When asked about the outlook for the future, MCI-EFI survey respondent David Schaefer, CEO, Mintaka Financial LLC, said, “We are very pleased with our year-over-year growth in application volume, originations, approval rates and access to capital. We think next year will be positive again but expect to see slight increases in delinquency and credit losses. We have seen extraordinary portfolio performance the past three years, but we’re planning for a more normal period in 2015.”

December 2014 Survey Results:
The overall MCI-EFI is 63.4, steady with the November index of 64.2.

    · When asked to assess their business conditions over the next four months, 28% of executives responding said they believe business conditions will improve over the next four months, up slightly from 27.3% in November. 72% of respondents believe business conditions will remain the same over the next four months, up from 69.7% in November. None believe business conditions will worsen, down from 3% the previous month.

    · 22% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 30.3% in November. 72% believe demand will “remain the same” during the same four-month time period, up from 66.7% the previous month. 6.3% believe demand will decline, up from 3% in November.

    · 22% of executives expect more access to capital to fund equipment acquisitions over the next four months, up slightly from 21.2% in November. 78% of survey respondents indicate they expect the “same” access to capital to fund business, down slightly from 78.8% in November. None expect “less” access to capital, unchanged from the previous month.

    · When asked, 43.8% of the executives reported they expect to hire more employees over the next four months, a decrease from 45.4% in November. 50% expect no change in headcount over the next four months, up from 48.5% last month. 6.3% expect fewer employees, essentially unchanged from November.

    · 3% of the leadership evaluate the current U.S. economy as “excellent,” unchanged from last month. 97% of the leadership evaluate the current U.S. economy as “fair,” and none rate it as “poor,” both also unchanged from November.

    · 47% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 42.4% who believed so in November. 53% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 54.6% in November. None believe economic conditions in the U.S. will worsen over the next six months, down from 3% last month.

    · In December, 37.5% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 42.4% in November. 62.5% believe there will be “no change” in business development spending, an increase from 54.6% last month. None believe there will be a decrease in spending, down from 3% last month.

December 2014 MCI-EFI Survey Comments from Industry Executive Leadership:

Bank, Small Ticket
“Lower energy costs will benefit consumers and small businesses. These are the segments of the economy that has been lagging compared to historical recoveries. I believe stronger spending will lift corporate revenues and, in reaction, business investment. Finally ?!” Paul Menzel, President & CEO, Financial Pacific Leasing, LLC

Bank, Middle Ticket
“Energy costs are the new looming uncertainty. In some sectors/industries this is a positive while in others it is a negative. How that balances out from a national as well as global standpoint remains to be seen, but it will give some pause to growth plans.” Harry Kaplun, President, Frost Equipment Leasing and Finance

Independent, Middle Ticket
“With gas prices declining truck and car sales continue to increase and the economy seems to continue to be slowly improving.” William Besgen, President and Chief Operating Officer, Hitachi Capital America Corp.

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

    1. Current business conditions
    2. Expected product demand over the next four months
    3. Access to capital over the next four months
    4. Future employment conditions
    5. Evaluation of the current U.S. economy
    6. U.S. economic conditions over the next six months
    7. Business development spending expectations
    8. Open-ended question for comment

How may I access the MCI-EFI?
Survey results are posted on the Foundation website included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

Equipment Investment Expected to Grow 6 Percent in 2015

Investment in equipment and software is expected to grow 6 percent in 2015, driven by a steadily improving economy, according to the Annual 2015 Equipment Leasing & Finance U.S. Economic Outlook released recently by the Equipment Leasing & Finance Foundation. Overall in 2015, the outlook for 12 individual equipment and software verticals tracked in the report is mixed, with some sectors outperforming others. The Foundation’s report, which is focused on the $903 billion equipment leasing and finance industry, forecasts 2015 equipment investment and capital spending in the United States and evaluates the effects of various industry and external factors likely to affect growth over the next 12 months. The report will be updated quarterly throughout 2015.

William G. Sutton, CAE, President of the Foundation and President and CEO of the Equipment Leasing and Finance Association, said, “The Association’s Monthly Leasing and Finance Index reports new business volume is up, the Foundation’s Monthly Confidence Index shows industry confidence is solidly positive, and this Outlook for 2015 projects continued steady growth in equipment and software investment. Equipment investment has been relatively modest in recent years, but picked up in 2014 and now seems poised to maintain this momentum into 2015. Overall, these trends portend a positive result for the equipment finance industry and U.S. economy.”

Highlights from the study include:

    • The U.S. economy is poised to have a breakout year in 2015, with growth expected to top 3%. Key “bright spots” that bode well for above-average growth include a rapidly improving labor market, increased access to credit, lower oil prices and fiscal healing. Meanwhile “wild cards” that could hinder growth include potential political gridlock, weakness in the global economy and geopolitical risks.
    • The steadily improving economy will likely drive solid equipment and software investment growth in 2015. Continued improvement in the economy should gradually loosen credit constraints and increase credit demand as businesses and households gain more confidence in the economy.
    • Equipment and software investment increased 9.3% in Q3 of 2014 after expanding 9.6% in Q2. Although these growth rates are unlikely to be sustained in the coming months, growth is still expected to be 5.9% in 2014 and remain relatively strong at 6.0% in 2015.
    • The Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, which is included in the report and tracks 12 equipment and software investment verticals, forecasts the following equipment investment activity:

  • o Agriculture machinery investment could see continued moderate declines over the next three to six months.
  • o Construction machinery investment should moderate over the next two quarters.
  • o Materials handling equipment investment growth may experience some moderation over the next three to six months.
  • o All other industrial equipment investment will likely remain strong over the next three to six months.
  • o Medical equipment investment growth is expected to be little changed over the next two quarters.
  • o Mining and oilfield machinery will likely slow or potentially experience negative growth in investment over the next three to six months, given recent declines in oil prices.
  • o Aircraft investment growth is expected to remain relatively stable over the next three to six months.
  • o Ships and boats investment will likely see little change in the next two quarters.
  • o Railroad equipment investment should moderate over the next three to six months.
  • o Trucks investment is expected to be little changed over the next three to six months.
  • o Computers investment will likely experience relatively stable investment over the next three to six months.
  • o Software investment will likely see a slight moderation in growth over the next three to six months.

The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The report will be updated quarterly throughout 2015.

Download the full report.

Confidence in Equipment Finance Market Remains at Highest Index Level in Two Years

The Equipment Leasing & Finance Foundation has released the April 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 65.1, remaining at the highest index level in two years for the second consecutive month.

When asked about the outlook for the future, MCI survey respondent Thomas Jaschik, president, BB&T Equipment Finance, said: “The first quarter of 2014 had positive results with respect to new business activity, and the economy is on a positive trajectory. The conclusion of the winter of 2013-2014 may be the catalyst for pent-up demand to begin to be released. This will have a positive impact on the equipment finance market throughout 2014.”

The overall MCI-EFI is 65.1, unchanged from the March index.

• When asked to assess their business conditions over the next four months, 37 percent of executives responding said they believe business conditions will improve over the next four months, up from 31.4 percent in March. Sixty percent of respondents believe business conditions will remain the same over the next four months, down from 65.7 percent in March. Two point nine percent believe business conditions will worsen, unchanged from the previous month.

• Thirty-seven percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 31.4 percent in March. And 60 percent believe demand will “remain the same” during the same four-month time period, down from 62.9 percent the previous month. Another 2.9 percent believe demand will decline, down from 5.7 percent who believed so in March.

• Also, 28.6 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 31.4 percent in March. And 71.4 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 68.6 percent in March. No one expects “less” access to capital, unchanged from the previous month.

• When asked, 37 percent of the executives reported they expect to hire more employees over the next four months, a decrease from 40 percent in March. Sixty percent expect no change in headcount over the next four months, unchanged from last month. Another 2.9 percent expect fewer employees, up from no one who expected fewer employees in March.

• And 2.9 percent of the leadership evaluates the current U.S. economy as “excellent,” down from 5.7 percent last month. Another 91.4 percent of the leadership evaluates the current U.S. economy as “fair,” up from 88.6 percent last month. Just under 6 percent rate it as “poor,” unchanged from March.

• Of the survey respondents, 34.3 percent believe that U.S. economic conditions will get “better” over the next six months, an increase from 31.4 percent who believed so in March. And 62.9 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 68.6 percent in March. And 2.9 percent believes economic conditions in the U.S. will worsen over the next six months, an increase from no one who believed so last month.

• In April, 40 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 45.7 percent in March. The other 60 percent believe there will be “no change” in business development spending, an increase from 54.3 percent last month. No one believes there will be a decrease in spending, unchanged from last month.

April 2014 MCI Survey Comments from Industry Executive Leadership:
Independent, Small Ticket
“I believe there are many projects that were put on hold during the last quarter due to the difficult weather conditions this winter. Equipment acquisition should improve as these projects get back on track as economic conditions continue to improve and the weather turns more favorable. The concerns I have are for the increasing amount of capital that continues to enter the marketplace bringing a downward pressure on yields.” Valerie Hayes Jester, President, Brandywine Capital Associates, Inc.

Bank, Small Ticket
“It seems that the U.S. consumer is gaining confidence, which may translate into increased spending. When this segment of our economy actually gains real traction, we will see tangible growth in GDP. The one caveat is the threat of a global event that could stall our cyclical recovery.” Paul Menzel, President & CEO, Financial Pacific Leasing, LLC

Bank, Middle Ticket
“The industries we serve continue to make capital investments to support growth activities. Drought in some areas of the country may curtail capital investment this year.” Michael Romanowski, President, Farm Credit Leasing Services Corporation

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

Investment in Equipment and Software Is Expected to Grow

Investment in equipment and software is expected to grow 4.2 percent in 2014, according to the Q2 update to the 2014 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation. The Foundation increased its 2014 equipment and software investment forecast to 4.2 percent, up from 3.1 percent growth forecast in its 2014 Annual Outlook released in December 2013. The Q2 report expects equipment and software investment to steadily grow over the next six months as economic conditions solidify and business confidence continues to recover. The Foundation report, which is focused on the $827 billion equipment leasing and finance industry, forecasts 2014 equipment investment and capital spending in the United States and evaluates the effects of various related and external factors in play currently and into the foreseeable future.

William G. Sutton, CAE, President of the Foundation and President and CEO of the Equipment Leasing and Finance Association, said, “The Foundation’s Outlook report reflects a strengthening economy and positive trends in equipment investment. These findings align with data from the Equipment Leasing and Finance Association’s recent Monthly Leasing and Finance Index and the Foundation’s Monthly Confidence Index. We know the cold winter has had some negative impact on the economy; however, with reduced policy uncertainty, stronger economic fundamentals and replacement demand, we remain optimistic about growth.”

Highlights from the study include:

  • The U.S. economy is expected to grow 2.8 percent in 2014, the fastest pace since the 2008-09 recession.
  • The severe weather this winter may have trimmed GDP growth by a full percentage point, but it is expected that some of the loss will be made up in subsequent quarters.
  • Equipment and software investment grew at an annualized rate of 8.9 percent in Q4 2013, following modest growth of 2.2 percent in Q3.
  • Credit supply continues to improve, and credit demand has rebounded for all business sizes.

Equipment and software investment is expected to steadily grow across most verticals, according to the Foundation-Keybridge U.S. Equipment & Software Investment Momentum Monitor, a newly expanded addition to the Outlook report. According to the Momentum Monitor, which track 12 equipment and software investment verticals:

    o Agriculture machinery investment will likely see slow growth in the first half of 2014 as both farm yields and commodity prices ease.
    o Construction machinery investment will see stronger growth later in the year, but the year-over-year growth figures will appear weak due to a high base year effect.
    o Materials handling equipment investment will experience slightly stronger growth over the next 3 to 6 months.
    o All other industrial equipment investment will likely see moderate growth over the next 3 to 6 months as the manufacturing sector’s competitiveness improves.
    o Medical equipment investment will grow, but at a more moderate pace than in the second half of 2013.
    o Mining & oilfield machinery is currently decelerating, but looks to rebound later in the year.
    o Aircraft investment will likely slow after a strong Q4, and growth will be about average for the year.
    o Ships & boats investment will likely continue at a below-average pace over the next year.
    o Railroad equipment investment will improve from its recent contraction toward modest growth.
    o Investment in trucks will exhibit high-single digit growth over the next 3 to 6 months as economic activity improves and diesel prices remain competitive.
    o Computers investment will be muted in the next 3 to 6 months after strong replacement demand over the past few quarters.
    o Software investment will be moderate in the next 3 to 6 months as companies focus on upgrading to new technology.

The Foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The Q2 report is the first update to the 2014 Annual Outlook, and will be followed by two more quarterly updates before the publishing of the 2015 Annual Outlook in December. Download the full report.

Equipment Finance Market Achieves Highest Index in Two Years

The Equipment Leasing & Finance Foundation has released the March 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 65.1, the highest index in two years and an increase from the February index of 63.3. The first quarter MCI levels are the three highest since April 2011.

When asked about the outlook for the future, MCI survey respondent Daryn Lecy, vice president of Operations, Stearns Bank N.A. Equipment Finance Division, says: “Considering we are coming off what are typically slower months and the likelihood that our extra-aggressive winter further impacted new business, we remain optimistic for 2014. We are fortunate to be experiencing year-over-year growth, increasing demand, and overall solid delinquency levels.”

March 2014 Survey Results
The overall MCI-EFI is 65.1, an increase from the February index of 63.3.

    When asked to assess their business conditions over the next four months, 31.4 percent of executives responding said they believe business conditions will improve over the next four months, up from 21.2 percent in February. Sixty-five point seven percent of respondents believe business conditions will remain the same over the next four months, down from 72.7 percent in February. And 2.9 percent believe business conditions will worsen, down from 6.1 percent who believed so the previous month.

    Just more than 31 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 24.2 percent in February. And 62.9 percent believe demand will “remain the same” during the same four-month time period, down from 69.7 percent the previous month. Another 5.7 percent believe demand will decline, down from 6.1 percent who believed so in February.

    Thirty-one point four percent of executives expect more access to capital to fund equipment acquisitions over the next four months, unchanged from February. And 68.6 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 65.5 percent in February. No one expects “less” access to capital, down from 3.1 percent who expected less access the previous month.

    When asked, 40 percent of the executives reported they expect to hire more employees over the next four months, relatively unchanged from February. The other 60 percent expect no change in headcount over the next four months, up from 53 percent last month. No one expects fewer employees, down from 6.3 percent who expected fewer employees in February.

    Five point seven percent of the leadership evaluates the current U.S. economy as “excellent,” up from 3 percent last month. While 88.6 percent of the leadership evaluates the current U.S. economy as “fair,” down from 93.8 percent last month. And 5.7 percent rate it as “poor,” up from 3 percent last month.

    When asked, 31.4 percent of the of survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 34.4 percent who believed so in February. And 68.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 59.4 percent in February. No one believes economic conditions in the U.S. will worsen over the next six months, a decrease from 6.2 percent last month.

    In March, 45.7 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 56.3 percent in February. Another 54.3 percent believe there will be “no change” in business development spending, an increase from 43.8 percent last month. No one believes there will be a decrease in spending, unchanged from last month.

March 2014 MCI Survey Comments from Industry Executive Leadership

Bank, Small Ticket
“We continue to see strong growth in both applications and origination volume. We are optimistic that this trend will continue as we close out the first quarter. In addition, portfolio performance in terms of delinquencies remains very low.” David Schaefer, CEO, Mintaka Financial, LLC

Independent, Middle Ticket
“New business volume targets in our truck transportation business continue to be met or exceeded by our over 2,300 dealers nationwide in the U.S., suggesting continued strength in the economy.” William Besgen, President & COO, Hitachi Capital America Corp.

Bank, Middle Ticket
“The overall economy is fair; however, I do see an increase in capital expenditures in 2014. The capital expenditures will be made to reduce labor cost and/or replace outdated or worn out equipment.” Elaine Temple, President, Bancorpsouth Equipment Finance

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

Equipment Leasing & Finance Foundation Releases February Confidence Index

The Equipment Leasing & Finance Foundation has released the February 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 63.3, the second highest index in two years and off slightly from last month’s two-year index high of 64.9.

When asked about the outlook for the future, MCI survey respondent Valerie Hayes Jester, President, Brandywine Capital Associates, Inc., said, “I am optimistic that there is increasing demand for equipment and therefore financing to acquire that equipment. The brutal winter experienced by a significant portion of this country has slowed down many projects that would have been in progress by now. I am hoping that the last third of this quarter will show the signs we had experienced at year end, as demand increased.”

February 2014 Survey Results:
The overall MCI-EFI is 63.3, a decrease from the January index of 64.9.

    When asked to assess their business conditions over the next four months, 21.2% of executives responding said they believe business conditions will improve over the next four months, down from 33% in January. 72.7% of respondents believe business conditions will remain the same over the next four months, up from 61% in January. 6.1% believe business conditions will worsen, up from 5.6% who believed so the previous month.

    24.2% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 36% in January. 69.7% believe demand will “remain the same” during the same four-month time period, up from 61% the previous month. 6.1% believe demand will decline, up from 2.8% who believed so in January.

    31.3% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 25% in January. 65.6% of survey respondents indicate they expect the “same” access to capital to fund business, down from 75% in January. 3.1% expect “less” access to capital, up from no one who expected less access the previous month.

    When asked, 40.6% of the executives reported they expect to hire more employees over the next four months, an increase from 33% in January. 53% expect no change in headcount over the next four months, down from 58.3% last month. 6.3% expect fewer employees, down from 8.3% who expected fewer employees in January.

    3% of the leadership evaluates the current U.S. economy as “excellent,” relatively unchanged from 2.8% last month. 93.8% of the leadership evaluates the current U.S. economy as “fair,” down slightly from 94.4% last month. 3% rate it as “poor,” also relatively unchanged from last month.

    34.4% of the of survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 41.7% who believed so in January. 59.4% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 55.6% in January. 6.2% believe economic conditions in the U.S. will worsen over the next six months, an increase from 2.6% last month.

    In February, 56.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 55.6% in January. 43.8% believe there will be “no change” in business development spending, an increase from 39% last month. No one believes there will be a decrease in spending, a decrease from 5.6% who believed so last month.

February 2014 MCI Survey Comments from Industry Executive Leadership:

    Bank, Small Ticket
    “Weather has created some slow down in equipment deliveries and inventory which may slow first quarter growth.” Kenneth Collins, CEO, Susquehanna Commercial Finance, Inc.

    Independent, Middle Ticket
    “I’m conflicted about the near-term. All small to medium-size customers claim activity is sporadic and are not willing to commit capital for new equipment. Thus we see demand is off, but funding availability is strong.” George Booth, Managing Director, Black Rock Capital, LLC

    Bank, Middle Ticket
    “The economy and the equipment finance market continue to experience peaks and valleys. The good news is the valleys aren’t getting any deeper; the bad news is the peaks aren’t getting any higher. Hopefully, in 2014 the economy will gain enough confidence to break through the peaks.” Thomas Jaschik, President, BB&T Equipment Finance

Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.

How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:

    Current business conditions
    Expected product demand over the next four months
    Access to capital over the next four months
    Future employment conditions
    Evaluation of the current U.S. economy
    U.S. economic conditions over the next six months
    Business development spending expectations
    Open-ended question for comment

Equipment Finance Market Experiences Highest Confidence Level in Two Years

The Equipment Leasing & Finance Foundation has released the January 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 64.9, the highest confidence level in two years, and an increase from the December index of 55.8. An improved general outlook for economic activity among industry leadership contributed to the increase.

When asked about the outlook for the future, MCI survey respondent David Schaefer, CEO, Mintaka Financial LLC, says: “We’re optimistic about 2014 as we come off of a very strong Q4. The recent federal budget deal is positive since it takes some uncertainty out of the market. Employment gains were also positive and this should bring more equipment demand and, therefore, financing opportunities. Margins are still being compressed as capital is abundant but demand remains fairly neutral.”

The overall MCI-EFI is 64.9, an increase from the December index of 55.8.

When asked to assess their business conditions over the next four months, 33 percent of executives responding said they believe business conditions will improve over the next four months, up from 12 percent in December. Sixty-one percent of respondents believe business conditions will remain the same over the next four months, down from 78.8 percent in December. Five and two-thirds percent believe business conditions will worsen, down from 9 percent who believed so the previous month.

Thirty-six percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 15.2 percent in December. Sixty-one percent believe demand will “remain the same” during the same four-month time period, down from 78.8 percent the previous month. Just under 3 percent believe demand will decline, down from 9 percent who believed so in December.

Twenty-five percent of executives expect more access to capital to fund equipment acquisitions over the next four months, relatively unchanged from December. Seventy-five percent of survey respondents indicate they expect the “same” access to capital to fund business, and no one expects “less” access to capital, both also unchanged from the previous month.

When asked, 33 percent of the executives reported they expect to hire more employees over the next four months, an increase from 27.3 percent in December. More than 58 percent expect no change in headcount over the next four months, down from 60.6 percent last month. Just over 8 percent expect fewer employees, down from 12 percent who expected fewer employees in December.

Just under 3 percent of the leadership evaluates the current U.S. economy as “excellent,” down from 6 percent last month. And 94.4 percent of the leadership evaluates the current U.S. economy as “fair,” up from 85 percent last month. Just under 3 percent rate it as “poor,” down from 9 percent in December.

About 42 percent of the of survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 24.2 percent who believed so in December. And 55.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 66.7 percent in December. Just under 3 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 9 percent in December.

In January, 55.6 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 30.3 percent in December. Thirty-nine percent believe there will be “no change” in business development spending, a decrease from 66.7 percent last month. About 6 percent believe there will be a decrease in spending, an increase from 3 percent who believed so last month.

Investment in Equipment Expected to Grow in 2014

Investment in equipment and software is expected to grow 3.1 percent in 2014 as economic conditions solidify and business confidence continues to recover, according to the Annual 2014 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation. Equipment investment is expected to grow across most verticals, as underlying economic fundamentals continue to improve. Overall in 2014, growth is forecast to be mixed, with some sectors outperforming others. The Foundation’s report, which is focused on the $827 billion equipment leasing and finance industry, forecasts 2014 equipment investment and capital spending in the United States and evaluates the effects of various related and external factors in play currently and into the foreseeable future. The report will be updated quarterly throughout 2014.

William G. Sutton, CAE, president of the foundation and president and CEO of the Equipment Leasing and Finance Association, said, “Looking into 2014, businesses will be making financing decisions in a dynamic environment. While the threat remains that policy uncertainty could negatively impact the U.S. economy and capital investment, potential stability in the federal budgeting process and an increase in GDP growth will drive up demand for equipment finance.”

Highlights from the study include:

  • • The U.S. economy is expected to grow 3 percent in 2014, the fastest pace since the 2008-09 recession. Assuming there is a solution to the current budget discussions, economic growth will be driven by a number of positive factors. Specifically, a strong housing market recovery, falling natural gas prices, robust auto sales, record high household wealth, steadily improving credit availability, and improving employment. However, these positive trends are counter-balanced by high oil prices, slow international growth, moderating fiscal consolidation and the continued threat of policy uncertainty.
    • In 2014, more dependable economic growth will help to generate stronger overall investment in equipment and software. Additionally, a rising interest rate environment could induce companies to lock in lower rates. Overall, these trends could yield a positive result for the equipment finance industry.

Trends in equipment investment include:

  • • Agriculture equipment investment is expected to remain weak on a quarter-to-quarter basis, and is projected to decline by 4 percent in 2014.
    • Computers & Software investment is expected to continue growing at the current below average rate. Annual growth should be in the 2 to 4 percent range during Q4 of 2013.
    • As expected, construction equipment investment declined in Q3 of 2013, falling 2.8 percent year-over-year. After reaching record-levels of investment in 2013, this vertical will likely decline by 5 to 10 percent in 2014.
    • Industrial equipment investment accelerated to 5 percent annual growth in Q3, and is expected to maintain a steady growth trend going forward. Employment, new orders, and earnings data point to a positive 2014.
    • Medical equipment investment grew in Q3 but the sector’s leading indicators suggest little to no growth going forward.
    • Transportation equipment investment saw modest growth in the third quarter, and improving indicators point stronger momentum over the next six to 12 months.

The foundation produces the Equipment Leasing & Finance U.S. Economic Outlook report in partnership with economics and public policy consulting firm Keybridge Research. The annual economic forecast provides a three-to-six-month outlook for industry investment with data, including a summary of investment trends in key equipment markets, credit market conditions, the U.S. macroeconomic outlook and key economic indicators. The report will be updated quarterly throughout 2014.