Equipment Leasing Remains at Two-Year High

The Equipment Leasing & Finance Foundation (the Foundation; Washington, DC) released its April 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). 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 $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 65.1, remaining at the highest index level in two years for the second consecutive month.

When asked about the outlook for the future, MCI survey respondent Thomas Jaschik, the president of BB&T Equipment Finance, said, “The first quarter of 2014 had positive results with respect to new business activity, and the economy is on a positive trajectory.  The conclusion of the winter of 2013-2014 may be the catalyst for pent-up demand to begin to be released.  This will have a positive impact on the equipment finance market throughout 2014.”

The latest report on the economy overall and various industry sectors within the Monthly Leasing and Finance Index. 

A brief look at the April 2014 Survey Results, where the overall MCI-EFI is 65.1, unchanged from the March index:

•    When asked to assess their business conditions over the next four months, 37 percent of executives responding said they believe business conditions will improve over the next four months, up from 31.4 percent in March.  60 percent of respondents believe business conditions will remain the same over the next four months, down from 65.7 percent in March.  2.9 percent believe business conditions will worsen, unchanged from the previous month.

•    37 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 31.4 percent in March.  60 percent believe demand will “remain the same” during the same four-month time period, down from 62.9 percent the previous month.  2.9 percent believe demand will decline, down from 5.7 percent who believed so in March.

•    28.6 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 31.4 percent in March.  71.4 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 68.6 percent in March.  No one expects “less” access to capital, unchanged from the previous month.

•    When asked, 37 percent of the executives reported they expect to hire more employees over the next four months, a decrease from 40 percent in March.  60 percent expect no change in headcount over the next four months, unchanged from last month.  2.9 percent expect fewer employees, up from no one who expected fewer employees in March.

•    2.9 percent of the leadership evaluates the current U.S. economy as “excellent,” down from 5.7 percent last month.  91.4 percent of the leadership evaluates the current U.S. economy as “fair,” up from 88.6 percent last month.  5.7 percent rate it as “poor,” unchanged from March.

•    34.3 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 31.4 percent who believed so in March.  62.9 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 68.6 percent in March.  2.9 percent believes economic conditions in the U.S. will worsen over the next six months, an increase from no one who believed so last month.

•    In April, 40 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 45.7 percent in March.  60 percent believe there will be “no change” in business development spending, an increase from 54.3 percent last month.  No one believes there will be a decrease in spending, unchanged from last month.

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

More survey results from the Foundation can be found here,

The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Funded through charitable individual and corporate donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. In 2014, the Foundation celebrates its 25th anniversary.

www.LeaseFoundation.org