Equipment finance industry confidence improves in January
The Equipment Leasing & Finance Foundation released its January 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market is 48.6, an increase from the December index of 42.5.
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.
When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, president and Ceo of Wintrust Specialty Finance, says, “I expect that Wintrust will have a good year in the market as we have stable liquidity, attractive cost of funds and an engaged and motivated team. I expect to continue to see challenges in the overall economy as well as specific segments, and we are diversified and nimble to move to the opportunity. The leasing industry has historically performed better than other asset classes through tougher times because of the nimble and creative nature of the industry. I expect that the industry will come through this next couple years stronger having learned from our experiences.”
January 2024 Survey Results:
The overall MCI-EFI is 48.6, an increase from the December index of 42.5.
- When asked to assess their business conditions over the next four months, 20.7 percent of the executives responding said they believe business conditions will improve over the next four months, an increase from 3.7 percent in December. 62.1 percent believe business conditions will remain the same over the next four months, down from 66.7 percent the previous month. Just 17.2 percent believe business conditions will worsen, a decrease from 29.6 percent in December.
- Only 13.8 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 3.7 percent in December. 65.5 percent believe demand will “remain the same” during the same four-month period, down from 74.1 percent the previous month; 20.7 percent believe demand will decline, a decrease from 22.2 percent in December.
- Further,13.8 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 3.7 percent in December; 75.9 percent of executives indicate they expect the same access to capital to fund business, up from 74.1 percent last month and10.3 percent expect less access to capital, down from 22.2 percent the previous month.
- When asked, 6.9 percent of the executives report they expect to hire more employees over the next four months, a decrease from 18.5 percent in December. 79.3 percent expect no change in headcount over the next four months, up from 63 percent last month. 13.8 percent expect to hire fewer employees, down from 18.5 percent in December.
- None of the leadership evaluate the current U.S. economy as excellent, unchanged from the previous month while 93.1 percent of the leadership evaluate the current U.S. economy as fair, up from 85.2 percent in December. Just 6.9 percent evaluate it as poor, down from 14.8 percent last month.
- Only 13.8 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, up from 3.7 percent in December and 65.5 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 66.7 percent last month. Finally, 20.7 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 29.6 percent the previous month.
- In January, 17.2 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 14.8 percent the previous month, while 65.5 percent believe there will be no change in business development spending, down from 66.7 percent in December. Just 17.2 percent believe there will be a decrease in spending, down from 18.5 percent last month.
January 2024 MCI-EFI survey comment from industry executive leadership:
Captive, Small Ticket
“We still see demand for light- and medium-duty trucks to satisfy ever-growing e-commerce business. We also see thousands of light and medium-duty trucks waiting for bodies to be upfitted. When the body companies catch up with chassis awaiting upfitting, we will see a lot of opportunities for equipment finance companies in this sector over the next three to six months,” says Jim DeFrank, excutive vice president and CEO, Isuzu Finance of America, Inc.
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.
How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment
Survey results are posted on the Foundation website,
https://www.leasefoundation.org/industry-resources/monthly-confidence-index/. Survey respondent demographics and additional information about the MCI are also available at the link above.
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