The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $1-trillion equipment finance sector, showed their overall new business volume for February was $5.9 billion, down 3% year-over-year from new business volume in February 2016. Volume was down 5% month-to-month from $6.2 billion in January. Year to date, cumulative new business volume was up 0.5% compared to 2016.
Receivables over 30 days were 1.50%, down from 1.70% the previous month and up from 1.40% in the same period in 2016. Charge-offs were 0.38%, down from 0.43% the previous month, and up slightly from 0.37% in the year-earlier period.
Credit approvals totaled 74.8% in February, down from 75.4% in January. Total headcount for equipment finance companies was up 18.6% year over year, a spike largely attributable to continued acquisition activity at an MLFI reporting company.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for March is 71.1, slightly lower than the February index of 72.2, but still among the highest levels of the last two years.
ELFA President and CEO Ralph Petta said: “New business volume during the first couple months of 2017 continues the sluggish growth pattern that began 2016. This slow start belies the business-friendly environment that many business and economic commentators point to in characterizing the new administration in Washington. Credit quality is mixed as well. With the Fed increasing its short-term interest rate target by 25 bps at its most recent March meeting, we will be watching closely the impact—if any—on demand in the equipment finance sector.”
Miles Herman, president and COO, LEAF Commercial Capital, Inc., said: “While independent firms saw better growth, overall the industry's new business volume was de minimis compared to this point in 2016. I believe there’s reason for optimism, however, given the market’s recent surge post-election, the proposed infrastructure spending and stable oil. There are indicators of a coming manufacturing renaissance and a plan to reduce Federal taxes and regulation. But will all this translate into legislation to justify the post-election optimism? Despite equity market choppiness and rising interest rates, I’m heartened to see that the MCI-EFI shows this confidence holding steady. Combined with other indicators, this seems to indicate a hopeful, if still wait-and-see, attitude in the industry and the economy as a whole. If promised legislative changes come to pass, it’s likely we’ll see that optimism become action.”
About the ELFA’s MLFI-25
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
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