Equipment Leasing and Finance Industry confidence eases again in October
Overall, confidence in the equipment finance market is 51.4, a decrease from the September index of 54.7.
The Equipment Leasing & Finance Foundation (the Foundation) releases the October 2019 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. Designed to collect leadership data, 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. Overall, confidence in the equipment finance market is 51.4, a decrease from the September index of 54.7.
“We still see continued demand for certain classes of replacement equipment. Our customers who have any cross-border interests seem to be postponing acquisitions due to uncertainty with trade issues and tariffs. The recent events in Washington could provide some headwinds to a strong fourth quarter,” says survey respondent Valerie Hayes Jester, president, Brandywine Capital Associates, Inc.
October 2019 Survey Results:
The overall MCI-EFI is 51.4, a decrease from 54.7 in September.
• When asked to assess their business conditions over the next four months, 9.7% of executives responding said they believe business conditions will improve over the next four months, down from 10.3% in September; 71% of respondents believe business conditions will remain the same over the next four months, a decrease from 75.9% the previous month and 19.4% believe business conditions will worsen, up from 13.8% in September.
• Further, 13.3% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, unchanged from September, but 73.3% believe demand will “remain the same” during the same four-month time period, a decrease from 76.7% the previous month; 13.3% believe demand will decline, up from 10% in September.
• Some of the respondents -- 16.7% -- expect more access to capital to fund equipment acquisitions over the next four months, unchanged from September; 80% of executives indicate they expect the “same” access to capital to fund business, a decrease from 83.3% last month and 3.3% expect “less” access to capital, an increase from none in September.
• When asked, 16.1% of the executives report they expect to hire more employees over the next four months, a decrease from 30% in September; 71% expect no change in headcount over the next four months, an increase from 63.3% last month and 12.9% expect to hire fewer employees, up from 6.7% the previous month.
• About 20% (19.4%) of the leadership evaluate the current U.S. economy as “excellent,” and 80.7% of the leadership evaluate the current U.S. economy as “fair,” both relatively unchanged from the previous month. None evaluate it as “poor,” unchanged from last month.
• A small number -- 3.2% -- of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, unchanged from September; 58.1% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 70% the previous month and 38.7% believe economic conditions in the U.S. will worsen over the next six months, an increase from 26.7% in September.
• In October, 25.8% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 26.7% last month. 71% believe there will be “no change” in business development spending, an increase from 70% in September. 3.2% believe there will be a decrease in spending, unchanged from last month.
October 2019 MCI-EFI survey comments from industry executive leadership:
Bank, Small Ticket
“Application volume remains strong with consistent approval rates. Portfolio performance remains strong and we are focused here given an uptick of delinquency by peers.” -- David Normandin, CLFP, President and CEO, Wintrust Specialty Finance
Independent, Small Ticket
“I'm optimistic that the consumer remains healthy, with low unemployment and relatively low personal debt. I'm concerned that the trade wars are starting to have effect on the economy, starting with transportation.” -- Quentin Cote, CLFP, President, Mintaka Financial, LLC
Bank, Middle Ticket
“We continue to see challenges in the agriculture industry. Until trade issues are resolved we do not expect a robust capital investment environment.” -- Michael Romanowski, President, Farm Credit Leasing
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
How may I access the MCI-EFI?
Survey results are posted on the Foundation website, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/, included in the Foundation Forecast eNewsletter, and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.
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