Equipment finance industry confidence higher in February
The Equipment Leasing & Finance Foundation released the February 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market is 51.7, an increase from the January index of 48.6.
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 Jeffry Elliott, president, Huntington Equipment Finance, says, “We believe there is a 50/50 chance of a recession this year, which will likely result in lower capex spending on equipment, at least in the first half or until interest rates decline. However, following the significant delay in equipment acquisitions last year, we still expect considerable activity this year, as equipment wears out and replacement can be delayed only so long. The speed of onshoring and reshoring also will determine the demand for acquiring equipment or capex. Fortunately, long-term growth prospects for the United States and North America are strong, and we think the largest-ever expansion in our nation’s history is on the horizon.”
February 2024 Survey Results:
The overall MCI-EFI is 51.7, an increase from the January index of 48.6.
- When asked to assess their business conditions over the next four months, 10.7 percent of the executives responding said they believe business conditions will improve over the next four months, a decrease from 20.7 percent in January; 82.1 percent believe business conditions will remain the same over the next four months, up from 62.1 percent the previous month, while 7.1 percent believe business conditions will worsen, a decrease from 17.2 percent in January.
- Only 7.1 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 13.8 percent in January and 78.6 percent believe demand will remain the same during the same four-month period, up from 65.5 percent the previous month. Only 14.3 percent believe demand will decline, a decrease from 20.7 percent in January.
- Of respondents, 14.3 percent expect more access to capital to fund equipment acquisitions over the next four months, up from 13.8 percent in January while 75 percent of executives indicate they expect the same access to capital to fund business, down from 75.9 percent last month; 10.7 percent expect less access to capital, up slightly from 10.3 percent the previous month.
- When asked, 21.4 percent of the executives report they expect to hire more employees over the next four months, an increase from 6.9 percent in January; 71.4 percent expect no change in headcount over the next four months, down from 79.3 percent last month. Just 7.1 percent expect to hire fewer employees, down from 13.8 percent in January.
- Only 3.6 percent of the leadership evaluate the current U.S. economy as excellent, up from none the previous month while 89.3 percent of the leadership evaluate the current U.S. economy as fair, down from 93.1 percent in January. Just 7.1 percent evaluate it as poor, relatively unchanged from 6.9 percent last month.
- Of survey respondents, 17.9 percent believe that U.S. economic conditions will get better over the next six months, up from 13.8 percent in January and 67.9 percent indicate they believe the U.S. economy will stay the same over the next six months, an increase from 65.5 percent last month. Just 14.3 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 20.7 percent the previous month.
- In February, 21.4 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 17.2 percent the previous month; 67.9 percent believe there will be “no change” in business development spending, up from 65.5 percent in January. Finally, 10.7 percent believe there will be a decrease in spending, down from 17.2 percent last month.
January 2024 MCI-EFI survey comment from industry executive leadership:
Bank, Small Ticket
“The U.S. economy is in transition and that brings opportunity to the creative and solution-oriented equipment finance and leasing companies in our industry. Our ability to pivot, meet our customers’ needs, and quickly execute on opportunities will determine our success. The headwinds of rising bankruptcy filings, delinquency and overall portfolio performance trending to long term averages are a change to the incredible times our industry has had for over a decade. This shift will affect organizations’ commitment and harm some while helping others. I look forward to growth in 2024.” -- David Normandin, president and chief executive officer, Wintrust Specialty Finance
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