Thursday, April 19, 2018

Equipment leasing and finance industry confidence eases in September


Monday, September 21, 2015
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.
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.

WASHINGTON — The Equipment Leasing & Finance Foundation in its September 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today showed overall confidence in the equipment finance market is 61.1, easing from the sharp rise in the August index of 67.4.

When asked about the outlook for the future, MCI-EFI survey respondent Thomas Jaschik, President, BB&T Equipment Finance, said, “An increase in interest rates may help to spur activity in the equipment finance sector. Rising costs are always an impetus for taking action now vs. later. Rising interest rates could be the catalyst to push companies to act now with respect to capital equipment acquisitions. This could create tremendous opportunities within the equipment finance market.”

 The survey found that:

  When asked to assess their business conditions over the next four months, 22.2 percent of executives responding said they believe business conditions will improve over the next four months, a decrease from 36.4 percent in August.  And 70.4 percent of respondents believe business conditions will remain the same over the next four months, an increase from 63.6 percent in August.  On the other hand, 7.4 percent believe business conditions will worsen, an increase from none who believed so the previous month.

  29.6 percent of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, down from 40.9 percent in August while 59.3 percent believe demand will “remain the same” during the same four-month time period, unchanged from the previous month.  Also, 11.1 percent believe demand will decline, an increase from none who believed so in August.

  25.9 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 31.8 percent in August.  Most, or 70.4 percent of survey respondents, indicate they expect the “same” access to capital to fund business, up from 68.2 percent in August while 3.7 percent expect “less” access to capital, up from none the previous month.

  When asked, 37.0 percent of the executives report they expect to hire more employees over the next four months, a slight increase from 36.4 percent in August while  59.3 percent expect no change in headcount over the next four months, down from 63.6 percent last month;  3.7 percent expect to hire fewer employees, up from none in August.

  None of the leadership evaluate the current U.S. economy as “excellent,” a decrease from 4.5 percent last month and  96.3 percent of the leadership evaluate the current U.S. economy as “fair,” up from 95.5 percent in August and  3.7 percent rate it as “poor,” an increase from none the previous month.

  18.5 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 27.3 percent who believed so in August and  74.1 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 68.2 percent in August.  An increased 7.4 percent believe economic conditions in the U.S. will worsen over the next six months, up from 4.5 percent who believed so last month.

  In September, 51.9 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 54.5 percent in August while  44.4 percent believe there will be “no change” in business development spending, a decrease from 45.5 percent last month;  3.7 percent believe there will be a decrease in spending, an increase from none last month.

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.

Bank spokesmen differed on how they see the equipment lending economy, with some still eyeing the global financial picture.

“We are still bullish as we head into the fourth quarter,” said Valerie Hayes Jester, president, Brandywine Capital Associates Inc. “Demand continues to be strong and in spite of the recent fluctuations of the stock market, our customers are continuing with business expansion projects and replacement of equipment.” 

“The full effect of international economic problems are the largest inhibitor to growth in the U.S.,” said Harry Kaplun, President, Specialty Finance, Frost Bank.

The respondents comprise 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.

Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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