Equipment Leasing and Finance Confidence Declines for the 7th Time in 8 Months

'Between the administration's trade strategy, the mid-term elections and the president's political challenges, decision makers are taking a wait-and-see approach to business investment'

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The Equipment Leasing & Finance Foundation's August 2018 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) measured its seventh drop in eight months, falling to 60.7. 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. 

When asked about the outlook, MCI-EFI survey respondent Paul Menzel, CLFP, CEO, Financial Pacific Leasing Inc., said, "'Uncertainty' is the theme in the economy for the balance of 2018. Between the administration's trade strategy, the mid-term elections and the president's political challenges, decision makers are taking a wait-and-see approach to business investment.”  

Screen Shot 2018 08 16 At 9 06 38 AmEquipment Leasing & Finance Foundation

August 2018 survey results

When asked to assess their business conditions over the next four months, 13.3% of executives responding said they believe business conditions will improve over the next four months, a decrease from 19.4% in July. Eighty percent of respondents believe business conditions will remain the same over the next four months, an increase from 77.4% the previous month. 6.7% believe business conditions will worsen, an increase from 3.2% who believed so the previous month.

16.7% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 19.4% in July. 83.3% believe demand will “remain the same” during the same four-month time period, an increase from 77.4% the previous month. None believe demand will decline, down from 3.2% who believed so in July.

16.7% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up slightly from 16.1% in July. 83.3% of executives indicate they expect the “same” access to capital to fund business, a slight decrease from 83.9% last month. None expect “less” access to capital, unchanged from last month.

When asked, 36.7% of the executives report they expect to hire more employees over the next four months, a decrease from 45.2% in July. 63.3% expect no change in headcount over the next four months, an increase from 51.6% last month. None expect to hire fewer employees, a decrease from 3.2% in July.

40% of the leadership evaluate the current U.S. economy as “excellent,” down from 41.9% last month. 60% of the leadership evaluate the current U.S. economy as “fair,” up from 58.1% in July. None evaluate it as “poor,” unchanged from last month.

13.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a slight increase from 12.9% in July. 73.3% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 77.4% the previous month. 13.3% believe economic conditions in the U.S. will worsen over the next six months, an increase from 9.7% in July.

In August, 33.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 45.2% in July. 66.7% believe there will be “no change” in business development spending, an increase from 54.8% the previous month. None believe there will be a decrease in spending, unchanged from last month.

“I think there remains pent-up demand for capital equipment, and strong economic activity bodes well for portfolio performance. My concerns are about the impact of trade wars on equipment manufacturers’ prices, and the politicization of Fed interest rate moves, which would lead to overheating and inflation,” said Quentin Cote, CLFP, president, Mintaka Financial LLC.

“Our application rate and quality have remained steady over the typically slower summer months signaling a strong fourth quarter. Interest rates continue to be attractive even after earlier rate hikes. Businesses continue to expand at a strong rate and equipment finance continues to be a substantial component of that trend,” said Valerie Hayes Jester, president, Brandywine Capital Associates.

“Trade tariffs are having an impact on capital investment by customers. Some are continuing to move forward, others are delaying investment. Overall, we are seeing business activity slightly behind levels from a year ago,” said Michael Romanowski, president, Farm Credit Leasing Services Corporation.

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