The Equipment Leasing & Finance Foundation's July 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) remained steady at 61.4, unchanged from June.
Based on 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 $827-billion equipment finance sector.
Adam D. Warner, president, key equipment finance and chairman of the Equipment Leasing and Finance Association (ELFA), said, “I don't believe that the dramatic contraction of the U.S. economy in Q1 should be blamed on winter weather. There are underlying concerns by businesses and consumers that real unemployment has been too high for too long and not enough of the federal incentives are around job creation. Additionally, the federal government's inability to collaborate on growth initiatives is having a lasting toll on confidence.”
When asked to assess their business conditions over the next four months, 28.6% of executives responding said they believe business conditions will improve over the next four months, up from 23.5% in June. In addition, 68.6% of respondents believe business conditions will remain the same over the next four months, down from 70.6% in June. And 2.9% believe business conditions will worsen, down from 5.9% who believed so the previous month.
Some 25.7% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 17.6% in June. About 68.6% believe demand will “remain the same” during the same four-month time period, down from 79.4% the previous month. And 5.7% believe demand will decline, up from 2.9% who believed so in June.
The survey shows that 25.7% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 26.5% in June, while 74.3% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 73.5% in June. No one expects “less” access to capital, unchanged from the previous month.
When asked, 37% of the executives reported they expect to hire more employees over the next four months, a decrease from 44% in June, and 60% expect no change in headcount over the next four months, up from 50% last month. Only 2.9% expect fewer employees, down from 5.9% who expected fewer employees in June.
Although 5.7% of the leadership evaluates the current U.S. economy as “excellent,” up from 2.9% last month, 88.6% of the leadership evaluates the current U.S. economy as “fair,” a decrease from 91.4% in June. Only 5.7% rate it as “poor,” unchanged from the last three months.
About 22.9% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 29.4% who believed so in June, whereas 74.3% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 70.6% in June. Only 2.9% believe economic conditions in the U.S. will worsen over the next six months, up from none last month.
In July, 25.7% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 35.3% in June. About 74.3% believe there will be “no change” in business development spending, an increase from 61.8% last month, and none believe there will be a decrease in spending, a decrease from 2.9% who believed so last month.
Comments from Industry Executive Leadership:
“The industry continues to supply capital to the economy. We are approving a strong percentage of applicants and our yields continue to be challenged. My concern is that demand still does not seem to be where it should be for an economy that should be expanding at this point. This tepid demand continues to drive strong competition both on rate and credit window.” Valerie Hayes Jester, president, Brandywine Capital Associates Inc.
“The economic climate remains cloudy. Investors have fewer places to go and invest. The tension in the Middle East and immigration issues are increasing and most likely will soften markets.” Kenneth Collins, CEO, Susquehanna Commercial Finance Inc.
“Economists generally point to a robust second half of 2014. If they’re right, the equipment finance market will have a strong second half. However, past predictions of a strong economic recovery have missed the mark. I am cautiously optimistic that predictions of a strong recovery beginning in the second half will finally ring true.” Thomas Jaschik, President, BB&T Equipment Finance
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