Equipment Leasing and Finance Association’s Survey of Economic Activity: Monthly Leasing and Finance Index
March new business volume down seven percent year-over-year; up 18 percent month-to-month and 0.5 percent year-to-date.
The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $1 trillion equipment finance sector, showed their overall new business volume for March was $9.3 billion, down 7 percent year-over-year from new business volume in March 2023. Volume was up 18 percent from $7.9 billion in February. Year-to-date, cumulative new business volume was up 0.5 percent compared to 2023.
Receivables more than 30 days were 2.1 percent, down from 2.2 percent the previous month and up from 1.9 percent in the same period in 2023. Charge-offs were 0.5 percent, up from 0.4 percent the previous month and up from 0.3 percent in the year-earlier period.
Credit approvals totaled 77 percent, up from 76 percent in February. Total headcount for equipment finance companies was up 1.5 percent year-over-year.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in April is 52.9, a decrease from the March index of 55.2.
“Some pullback in new business volume in March largely reflects the effect of banks tightening their lending. Instead of a customary end-of-quarter spike, banks saw originations fall more than 20 percent in March, while other respondents enjoyed a stronger month. Credit quality is mixed, with receivables continuing to improve while charge-offs ticked back up. Interestingly, results of an informal poll of MLFI-25 respondents indicate some customers are limiting their equipment acquisitions until interest rates come down, which supports our Foundation’s forecast that equipment and software investment should pick up in the latter part of the year when the Fed is expected to begin its rate cuts. Along with the improved GDP growth forecast, we remain cautiously optimistic for continued growth for our industry,” says Leigh Lytle, ELFA president and CEO
“The equipment leasing and finance industry has historically been an excellent predictor of economic times. There was much confidence as we entered this year that originations and portfolio performance would continue to improve as witnessed by the strength of the U.S. economy. However, the punch bowl may have been taken away with March’s inflation report. We are seeing industry benchmark rates returning to November levels. As a result, the thought of a Fed rate cut may be delayed. We already saw a dip in small business optimism and persistent higher levels of inflation may further dampen it. Middle market businesses had seemed more optimistic in Q1 to spend, but CFOs may hit the pause button as well. All this suggests rougher waters to navigate over the next few months on both sides—front end originations and back-end portfolio management,” says Miles Herman, CEO, Leaf Commercial Capital, Inc.
About ELFA’s MLFI-25
The MLFI-25 is the only near-real-time index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
The MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants, is available at www.elfaonline.org/knowledge-hub/mlfi.
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