Equipment Leasing and Finance Industry Confidence at Two-Year High for Third Consecutive Month

The Equipment Leasing & Finance Foundation (the Foundation) has released the May 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 65.4, relatively unchanged from 65.1 last month, peaking at the highest index level in two years for the third consecutive month.

When asked about the outlook for the future, MCI survey respondent, Valerie Hayes Jester, President, Brandywine Capital Associates, Inc., said, “We have experienced a transaction flow that appears to be returning to a more normal state after the winter slowdown. Companies seem to be getting back on track and ordering equipment that should have been delivered in the first quarter. I am still concerned with the longer term effects of the many changes in our healthcare system as well as still undetermined tax policies that have great impact on small businesses.”

May 2014 Survey Results:
The overall MCI-EFI is 65.4, relatively unchanged from the April index.

When asked to assess their business conditions over the next four months, 31.4% of executives responding said they believe business conditions will improve over the next four months, down from 37% in April. 68.6% of respondents believe business conditions will remain the same over the next four months, up from 60% in April. No one believes business conditions will worsen, down from 2.9% the previous month.

34.3% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 37% in April. 65.7% believe demand will “remain the same” during the same four-month time period, up from 60% the previous month. No one believes demand will decline, down from 2.9% who believed so in April.

28.6% of executives expect more access to capital to fund equipment acquisitions over the next four months, unchanged from April. 71.4% of survey respondents indicate they expect the “same” access to capital to fund business, and no one expects “less” access to capital, also both unchanged from the previous month.

When asked, 40% of the executives reported they expect to hire more employees over the next four months, an increase from 37% in April. 51.4% expect no change in headcount over the next four months, down from 60% last month. 8.6% expect fewer employees, up from 2.9% who expected fewer employees in April.

2.9% of the leadership evaluates the current U.S. economy as “excellent,” 91.4% of the leadership evaluates the current U.S. economy as “fair,” and 5.7% rate it as “poor,” all unchanged from April.

37% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 34.3% who believed so in April. 62.9% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, unchanged from April. No one believes economic conditions in the U.S. will worsen over the next six months, a decrease from 2.9% who believed so last month.

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

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 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.