Equipment Finance Confidence Down Slightly in March

The Equipment Leasing & Finance Foundation found confidence in the equipment finance market decreased slightly in its March Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI).

The index is a qualitative assessment of current business conditions and future expectations as reported by key executives from the $1 trillion equipment-finance sector.

Overall, confidence in the equipment finance market sits at 72.2 in March, easing down one point from 73.2 in February.

Despite the small dip, survey respondents were positive about the future.

“We are seeing growth in [capital expenditure] spending across a broad segment of the economy,”said MCI-EFI survey respondent Anthony Cracchiolo, president and CEO of the U.S. Bank Equipment Finance. “While some areas are expanding more quickly than others, all are moving in a positive direction. Businesses are more positive than we have seen in over a decade and activity is picking up momentum. The equipment finance industry is healthy and poised to support the expanding economy.”

March 2018 Survey Results:
When asked to assess their business conditions over the next four months, 54.8% of executives responding said they believe business conditions will improve over the next four months, an increase from 46.4% in February. About 45% of respondents believe business conditions will remain the same over the next four months, a decrease from 53.6% the previous month. None believe business conditions will worsen, unchanged from the previous month.

Other index highlights include:

• 67.7% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, unchanged from February. 32.3% believe demand will “remain the same” during the same four-month time period, relatively unchanged from 32.1% the previous month. None believe demand will decline, also unchanged from February.
• 22.6% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 28.6% in February. 74.2% of executives indicate they expect the “same” access to capital to fund business, an increase from 67.9% last month. 3.2% expect “less” access to capital, down slightly from 3.6% last month.
• 41.9% of the executives report they expect to hire more employees over the next four months, a decrease from 42.9% in February. 51.6% expect no change in headcount over the next four months, a decrease from 53.6% last month. 6.5% expect to hire fewer employees, up from 3.6% in February.
• 29.0% of the leadership evaluate the current U.S. economy as “excellent,” up from 25.0% last month. 71.0% of the leadership evaluate the current U.S. economy as “fair,” down from 75.0% in February. None evaluate it as “poor,” unchanged from last month.
• 45.2% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 60.7% in February. 51.6% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 35.7% the previous month. 3.2% believe economic conditions in the U.S. will worsen over the next six months, a slight decrease from 3.6% in February.
• 51.6% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 53.6% in February. 45.2% believe there will be “no change” in business development spending, a decrease from 46.4% the previous month. 3.2% believe there will be a decrease in spending, an increase from none who believed so last month.

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.

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.

Survey results are posted on the Foundation website, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/ and included in the Foundation Forecast eNewsletter. Survey respondent demographics and additional information about the MCI are also available at the link above.