Equipment finance industry confidence eases further in November
The Equipment Leasing & Finance Foundation releases the November 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI); overall, confidence in the equipment finance market is 43.7, a decrease from the October index of 45.
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 Aylin Cankardes, president, Rockwell Financial Group, said, "There continues to be uncertainty in the markets as a result of inflationary pressures, rising rates and the unknown impact of mid-term elections. Due to ongoing challenges from supply chain delays, we are seeing increased demand for used equipment. Overall, our customers have been very resilient and underlying growth has been robust so we anticipate a strong finish to 2022, particularly in the energy transition and sustainability finance sector.”
November 2022 survey results:
The overall MCI-EFI is 43.7, a decrease from the October index of 45.
- When asked to assess their business conditions over the next four months, none of the executives responding said they believe business conditions will improve over the next four months, unchanged from October. Almost half (46.4 percent) believe business conditions will remain the same over the next four months, down from 62.5 percent the previous month. 53.6 percent believe business conditions will worsen, an increase from 37.5 percent in October.
- Just 10.7 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 8.3 percent in October. 67.9 percent believe demand will remain the same during the same four-month period, an increase from 66.7 percent the previous month. 21.4 percent believe demand will decline, down from 25 percent in October.
- Only 14.3 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 4.2 percent in October. 64.3 percent of executives indicate they expect the same access to capital to fund business, a decrease from 87.5 percent last month. 21.4 percent expect less access to capital, up from 8.3 percent the previous month.
- When asked, 32.1 percent of the executives report they expect to hire more employees over the next four months, up from 29.2 percent in October. 64.3 percent expect no change in headcount over the next four months, a decrease from 66.7 percent last month. 3.6 percent expect to hire fewer employees, down from 4.2 percent in October.
- Only 3.6 percent of the leadership evaluate the current U.S. economy as excellent, a decrease from 8.3 percent the previous month. 75 percent of the leadership evaluate the current U.S. economy as fair, up from 66.7 percent in October. 21.4 percent evaluate it as poor, a decrease from 25 percent last month.
- None of the survey respondents believe that U.S. economic conditions will get better over the next six months, unchanged from October. 28.6 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 41.7 percent last month. 71.4 percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 58.3 percent the previous month.
- In November, 28.6 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 25 percent the previous month; 64.3 percent believe there will be no change in business development spending, down from 70.8 percent in October. 7.1 percent believe there will be a decrease in spending, an increase from 4.2 percent last month.
November 2022 MCI-EFI survey comments from industry executive leadership:
Independent, small ticket
“Despite the economic headwinds and rising interest rates, there will still be decent demand as equipment that has aged due to supply chain constraints will need to be replaced. We are concerned how the rising costs of borrowing combined with a softening economy will impact some of our leveraged borrowers.” -- Chris Lerma, president, AP Equipment Financing
Independent, middle ticket
“While our customers will pay higher interest rates due to continued policy moves by the Federal Reserve, we don't expect spending on major capital expenditures to be negatively impacted solely by higher rates. We are, however, on the lookout for slowing in certain sectors that will eventually slow down or delay spending on equipment purchases.”
-- Bruce J. Winter, president, FSG Capital, Inc.
Bank, middle ticket
“Supply chain issues look to extend into 2023. delaying equipment purchases. Higher rates are having customers consider leasing options to conserve cash flow.” -- Michael Romanowski, president, Farm Credit Leasing
Some MCI survey questionnaires and comments were submitted before Election Day results were publicized.
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.
Learn more at www.leasefoundation.org.
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