Leasing and Finance Confidence up for Third Consecutive Month
The Equipment Leasing & Finance Foundation’s Confidence Index for January shows industry confidence rose for the third consecutive month, reaching a score of 59.9 vs 56.2 in December.
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 $900 billion equipment finance sector.
When asked about the outlook for the future, survey respondent David Normandin, CLFP, president and CEO, Wintrust Specialty Finance, said, “Demand for leasing in the segments we are involved in has remained strong with huge demand in Q4 2019. Credit quality has remained solid and pull through has been good. Unemployment remains low and we see small business customers remaining optimistic.”
January 2020 Survey Results:
The overall MCI-EFI is 59.9, an increase from 56.2 in December.
• When asked to assess their business conditions over the next four months, 14.8% of executives responding said they believe business conditions will improve over the next four months, up from 10.3% in December. Then, 81.5% of respondents believe business conditions will remain the same over the next four months, a decrease from 82.8% the previous month, and 3.7% believe business conditions will worsen, down from 6.9% in December.
• Next, 11.1% 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 10% in December. And 85.2% believe demand will “remain the same” during the same four-month time period, an increase from 76.7% the previous month, with 3.7% believing demand will decline, down from 13.3% in December.
• Next, 11.1% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 20% in December. Then, 85.2% of executives indicate they expect the “same” access to capital to fund business, an increase from 80% last month, and 3.7% expect “less” access to capital, up from none the previous 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 December. Sixty-three percent expect no change in headcount over the next four months, relatively unchanged from 63.3% last month, but 3.7% expect to hire fewer employees, down from 6.7% the previous month.
• Thirty-seven percent of the leadership evaluate the current U.S. economy as “excellent,” up from 23.3% the previous month. Sixty-three percent of the leadership evaluate the current U.S. economy as “fair,” down from 76.7% in December. None evaluate it as “poor,” unchanged from last month.
• When asked, 13.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, 80% indicate they believe the U.S. economy will “stay the same” over the next six months, and 6.7% believe economic conditions in the U.S. will worsen over the next six months, all unchanged from December.
• In January, 48.2% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 23.3% last month. Then, 48.2% believe there will be “no change” in business development spending, a decrease from 73.3% in December, and 3.7% believe there will be a decrease in spending, relatively unchanged from 3.3% last month.
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.