The latest report from the Equipment Leasing and Finance Foundation finds confidence in the equipment finance market eased to 63.2 in October, a drop from 65.5 in September.
The October 2018 Monthly Confidence Index for the Equipment Finance Industry is 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.
“Business optimism is apparent in all sectors, which leads to more capital spending,” said Harry Kaplun, president, specialty finance, Frost Bank. “While there is some caution with large expansions, most companies are willing to spend on equipment to grow.”
Highlights from the survey
October 2018 Survey Results:
- When asked to assess their business conditions over the next four months, 18.5% of executives responding said they believe business conditions will improve over the next four months, an increase from 17.9% in September. 81.5% of respondents believe business conditions will remain the same over the next four months, a decrease from 82.1% the previous month. None believe business conditions will worsen, unchanged from the previous month.
- 25.9% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 35.7% in September. 70.4% believe demand will “remain the same” during the same four-month time period, an increase from 64.3% the previous month. 3.7% believe demand will decline, up from none who believed so in September.
- 14.8% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 10.7% in September. 85.2% of executives indicate they expect the “same” access to capital to fund business, a decrease from 89.3% last month. None expect “less” access to capital, unchanged from last month.
- When asked, 44.4% of the executives report they expect to hire more employees over the next four months, a decrease from 50% in September. 48.2% expect no change in headcount over the next four months, a decrease from 50% last month. 7.4% expect to hire fewer employees, up from none last month.
- 51.9% of the leadership evaluate the current U.S. economy as “excellent,” 48.2% of the leadership evaluate the current U.S. economy as “fair,” and none evaluate it as “poor,” all unchanged from last month.
- 11.1% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, unchanged from September. 74.1% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 85.2% the previous month. 14.8% believe economic conditions in the U.S. will worsen over the next six months, an increase from 3.7% in September.
- In October, 44.4% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 40.7% in September. 55.6% believe there will be “no change” in business development spending, a decrease from 59.3% the previous month. None believe there will be a decrease in spending, unchanged from last month.
Why conduct the assessment?
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:
- Current business conditions
- Expected product demand over the next four months
- Access to capital over the next four months
- Future employment conditions
- Evaluation of the current U.S. economy
- U.S. economic conditions over the next six months
- Business development spending expectations
- Open-ended question for comment
Source: Equipment Leasing and Finance Foundation