Equipment finance industry confidence up third consecutive month in March
Overall, confidence in the equipment finance market increased for the third consecutive month to 55.2, up from the February index of 51.7, and the highest level since April 2022, reports the Equipment Leasing & Finance Foundation.
The Equipment Leasing & Finance Foundation release the March 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) March 21. 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, Keith Smith, president, Equipment & Franchise Finance, Star Hill Financial LLC, said, “Supply chain and demand seemed to have caught up to each other, we are finally seeing equipment ordered and delivered in real time. This has increased the overall activity in the equipment funding space. My biggest concern is the volatility the financial markets, specifically the health of mid-market/regional banks. Historically, these institutions have been the backbone of funding in the equipment finance industry, and right now even the deposit-healthy institutions are slowing their lending due to regulatory concerns.”
March 2024 survey results
The overall MCI-EFI is 55.2, an increase from the February index of 51.7.
- When asked to assess their business conditions over the next four months, 19.4 percent of the executives responding said they believe business conditions will improve over the next four months, an increase from 10.7 percent in February; 77.4 percent believe business conditions will remain the same over the next four months, down from 82.1 percent the previous month and just 3.2 percent believe business conditions will worsen, a decrease from 7.1 percent in February.
- A quarter (25.8 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 7.1 percent in February; 71 percent believe demand will remain the same during the same four-month period, down from 78.6 percent the previous month. Only 3.2 percent believe demand will decline, a decrease from 14.3 percent in February.
- Only 16.1 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 14.3 percent in February, while 74.2 percent of executives indicate they expect the same access to capital to fund business, down from 75 percent last month; 9.7 percent expect less access to capital, down from 10.7 percent the previous month.
- When asked, 19.4 percent of the executives report they expect to hire more employees over the next four months, a decrease from 21.4 percent in February; 67.7 percent expect no change in headcount over the next four months, down from 71.4 percent last month; 12.9 percent expect to hire fewer employees, up from 7.1 percent in February.
- None of the leadership evaluate the current U.S. economy as excellent, down from 3.6 percent the previous month while 93.6 percent of the leadership evaluate the current U.S. economy as fair, up from 89.3 percent in February. Only 6.5 percent evaluate it as poor, down from 7.1 percent last month.
- A quarter (25.8 percent) of the survey respondents believe that U.S. economic conditions will get better over the next six months, up from 17.9 percent in February and 54.8 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 67.9 percent last month. Finally, 19.4 percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 14.3 percent the previous month.
- In March, 22.6 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 21.4 percent the previous month and 64.5 percent believe there will be no change in business development spending, down from 67.9 percent in February; 12.9 percent believe there will be a decrease in spending, up from 10.7 percent last month.
March 2024 MCI-EFI survey comments from industry executive leadership
Bank, Small Ticket
“The borrowers that have navigated through the uncertain economic conditions and higher rates should emerge even stronger as the economy strengthens.” -- Charles Jones, senior vice president, 1st Equipment Finance, Inc. (FNCB Bank)
“I continue to think that 2024 will be a solid growth year for Wintrust Specialty Finance. The year has started off strong with new business originations at double-digit increases over the same period in 2023. Application volume continues to be strong while approval rates are lower due to lower credit quality we are seeing in the market. Portfolio performance remains heightened from recent years and still performing favorably to historic averages. It is important to remain focused on quality and portfolio performance as we wade our way through the transition in the economy.” -- David Normandin, president and chief executive officer, Wintrust Specialty Finance
Bank, Middle Ticket
“The normalization of income in the grains and oilseeds sector of production agriculture has the potential to increase demand for financing. It will also increase credit risk, albeit from exceptionally strong levels.” -- Jason Lueders, president, Farm Credit Leasing
Captive, Small Ticket
“Inventories are returning to pre-COVID levels and end users need to replace older equipment they were forced to keep in service. A stabilizing rate environment and an election coming up could make 2024 a very good year.” -- Jim DeFrank, executive vice president and chief operating officer, Isuzu Finance of America, Inc.
Independent, Large Ticket
“I expect conditions to remain stable for the balance of the year due to the upcoming election and the anticipation for interest rates to decrease.” -- Jonathan Albin, chief operating officer, Nexseer Capital
Independent, Small Ticket
“The net jobs growth is now relatively weak and there are fewer job openings. The Fed may have, or is near, achieving a ‘soft’ landing with the economy.” James D. Jenks, CEO, Global Finance and Leasing Services, LLC
Survey results are posted on the Foundation website, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/
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