Equipment finance industry confidence highest in more than two years
The Equipment Leasing & Finance Foundation reports the August 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) is 58.4, an increase from the July index of 50.7, and the highest level since February 2022.
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.
“Our overall confidence in the near-term future of the industry is high. We’re expecting economic conditions for businesses to improve over the next six months as interest rates decline and investment in U.S. manufacturing continues to grow, which in turn will lead to rising demand for funding to complete capex projects,” says When asked about the outlook for the future, says Jeff Elliott, president of Huntington Equipment Finance.
August 2024 survey results
The overall MCI-EFI is 58.4, an increase from the July index of 50.7.
- When asked to assess their business conditions over the next four months, 37.5 percent of the executives responding said they believe business conditions will improve over the next four months, an increase from 3.9 percent in July, while 45.8 percent believe business conditions will remain the same over the next four months, down from 76.9 percent the previous month; 16.7 percent believe business conditions will worsen, down from 19.2 percent in July.
- Almost half (41.7 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 11.7 percent in July and 37.5 percent believe demand will remain the same during the same four-month period, down from 73.1 percent the previous month. Only 20.8 percent believe demand will decline, an increase from 15.4 percent in July.
- Just 20.8 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 19.2 percent in July and 75 percent of executives indicate they expect the same access to capital to fund business, down from 76.9 percent last month. Only 4.2 percent expect less access to capital, relatively unchanged from 3.9 percent the previous month.
- When asked, 20.8 percent of the executives report they expect to hire more employees over the next four months, a decrease from 23.1 percent in July; 70.8 percent expect no change in headcount over the next four months, up from 69.2 percent last month. 8.3 percent expect to hire fewer employees, up from 7.7 percent in July.
- None of the leadership evaluate the current U.S. economy as excellent, unchanged from the previous month, while 91.7 percent of the leadership evaluate the current U.S. economy as fair, up from 84.6 percent in July. Only8.3 percent evaluate it as poor, down from 15.4 percent last month.
- More than one third (37.5 percent) of the survey respondents believe that U.S. economic conditions will get better over the next six months, up from 19.2 percent in July and 41.7 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 57.7 percent last month. A fifth (20.8 percent) believe economic conditions in the U.S. will worsen over the next six months, a decrease from 23.1 percent the previous month.
- In August, 33.3 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 19.2 percent the previous month; 62.5 percent believe there will be no change in business development spending, down from 73.1 percent in July ans 4.2 percent believe there will be a decrease in spending, down from 7.7 percent last month.
August 2024 MCI-EFI survey comments from industry executive leadership:
Bank, Small Ticket
“Interest rates are expected to decrease shortly. Historically when this happens businesses tend to increase their capex spending. I believe there is pent-up demand in several sectors that are waiting for this interest rate reduction to happen. Interest rates typically impact transactional business and equipment finance is one of those industries,” says Donna Yanuzzi, executive vice president, 1st Equipment Finance, Inc. a division of Peoples Security Bank and Trust Company.
Bank, Middle Ticket
“Leasing's value proposition is strong in today's economic environment. We are starting to see cracks emerge in some parts of our market, not in an alarming or unanticipated way, as we have been anticipating them for some time, but it is notable that we are finally seeing some weakness appear,” says Jason Lueders, president, Farm Credit Leasing.
Independent, Small Ticket
“The equipment finance industry ebbs and flows; it always has and always will. That said, it is a very resilient, creative and opportunistic industry, and rarely can get derailed. Many truly believe the best is yet to come as we navigate the winding road,” says Adrian Hebig, chief corporate development officer, Channel.
“I believe the worst is behind us now, and I expect the Fed Fund rate will be cut by a quarter of a point in September. Between now and the end of the year we should experience a gradual improvement in the economy,” predicts James D. Jenks, CEO, Global Finance and Leasing Services, LLC.
Survey results are posted at https://www.leasefoundation.org/industry-resources/monthly-confidence-index/. Details about the MCI, including who participates, how it’s designed, and the survey respondent demographics are also available at the link above.
PRO CONTRACTOR RENTALS MAGAZINE
Pro Contractor Rentals provides information of value to rental centers who focus time, resources and attention on meeting the demands of construction contractors and other equipment rental customers.
