Equipment Leasing and Finance Industry Confidence Higher in July
July 23, 2019 – The Equipment Leasing & Finance Foundation has released the July 2019 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 $1 trillion equipment finance sector. Overall, confidence in the equipment finance market was 57.9, an increase from the June index of 52.8.
When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said, “The metrics remain solid for the U.S. economy and specifically small business lending. Our application volume continues to grow and conversion rates are strong. The inherent risk in the portfolio continues to be good and performance continues as it has been, with extremely low defaults. My concerns continue to be overly aggressive credit quality and pricing in the overall market. These historically are the indicators of challenges to come, and therefore we remain focused on these metrics in our business.”
July 2019 Survey Results:
• When asked to assess their business conditions over the next four months, 10% of executives responding said they believe business conditions will improve over the next four months, up from 3.3% in June. Next, 83.3% of respondents believe business conditions will remain the same over the next four months, an increase from 80% the previous month, and 6.7% believe business conditions will worsen, a decrease from 16.7% in June.
• Ten percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from none who believed so in June. Then, 86.7% believe demand will “remain the same” during the same four-month time period, an increase from 83.3% the previous month, and 3.3% believe demand will decline, down from 16.7% who believed so in June.
• Ten percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 13.3% in June. Ninety percent of executives indicate they expect the “same” access to capital to fund business, an increase from 86.7% last month. None expect “less” access to capital, unchanged from last month.
• When asked, 33.3% of the executives report they expect to hire more employees over the next four months, an increase from 30% in June. Around 63.3% expect no change in headcount over the next four months, unchanged from last month, and 3.3% expect to hire fewer employees, down from 6.7% last month.
• When asked, 41.4% of the leadership evaluate the current U.S. economy as “excellent,” up from 40% in June, while 58.6% of the leadership evaluate the current U.S. economy as “fair,” an increase from 56.7% the previous month. None evaluate it as “poor,” down from 3.3% in June.
• Next, 6.7% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 3.3% in June. Eighty percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 70% the previous month, and 13.3% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 26.7% in June.
• In July, 30% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 26.7% last month. Seventy percent believe there will be “no change” in business development spending, a decrease from 73.3% in June. None believe there will be a decrease in spending, unchanged from 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.
Survey results are posted on the Foundation website, https://www.leasefoundation.