Reports issued by the Equipment Leasing & Finance Foundation are showing a declining trend in equipment financing confidence. Its index, known as the Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), was 63.9 in January, 61.8 in February, 58.2 in March and 56.1 in April. That's a 12.2% decrease for the year. The May index report is due out within the next two weeks.
The index aims to assess business conditions and expectations for the future, based on feedback from equipment finance executives. One such response came from Jim DeFrank, EVP and chief operating officer at Isuzu Finance of America, who said, “there is huge pent-up demand for all kinds of products. In the transportation space, the final-mile vehicles are in great demand, and we see this continuing for at least 12 to 18 months. Once the supply chain catches up, we will see some kind of normalcy return to the equipment finance industry.”
When asked to assess their business conditions over the next few months, 14.8% of executives responding said they believe business conditions will improve over the next four months, a decrease from 21.4% in March. 63% believe business conditions will remain the same over the next four months, up from 50% the previous month. 22.2% believe business conditions will worsen, a decrease from 28.6% in March. Other findings include:
- 29.6% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next few months, up from 25% in March. 55.6% believe demand will “remain the same” during the same time period, a decrease from 75% the previous month. 14.8% believe demand will decline, up from none in March.
- 22.2% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 21.4% in March. 77.8% of executives indicate they expect the “same” access to capital to fund business, a decrease from 78.6% last month. None expect “less” access to capital, unchanged from March.
- When asked, 40.7% of the executives report they expect to hire more employees over the next four months, down from 46.4% in March. 59.3% expect no change in headcount over the next four months, an increase from 50% last month. None expect to hire fewer employees, down from 3.6% in March.
- 14.8% of the leadership evaluate the U.S. economy as “excellent,” an increase from 3.6% the previous month. 74.1% of the leadership evaluate the current U.S. economy as “fair,” down from 85.7% in March. 11.1% evaluate it as “poor,” a slight increase from 10.7% last month.
- 7.4% of the survey respondents believe that U.S. economic conditions will get better over the next six months, relatively unchanged from 7.1% in March. 51.9% indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 57.1% last month. 40.7% believe economic conditions in the U.S. will worsen over the next six months, an increase from 35.7% the previous month. “The Fed’s stated position to raise rates to try to tame inflation will begin to have consequences in the economy. As consumers spend their leftover stimulus funding this year, there will be less money available for discretionary spending, and the rapidly rising costs of staples will hurt those at the lowest end of the income spectrum,” said Bruce J. Winter, president at FSG Capital.
- In April, 29.6% of respondents indicated they believed their company will increase spending on business development activities during the next six months, down from 42.9% the previous month. 66.7% believe there will be “no change” in business development spending, up from 57.1% in March. 3.7% believe there will be a decrease in spending, up from none last month.
