Equipment leasing, finance industry confidence reaches all-time high

Washington, DC — The Equipment Leasing & Finance Foundation (the Foundation) released the January 2017 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) on Jan. 19.

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. Overall, confidence in the equipment finance market is 73.4, an increase from the December index of 67.5, and the highest index since the MCI was launched in May 2009 to track recovery after the 2008 downturn.

When asked about the outlook for the future, MCI-EFI survey respondent Thomas Jaschik, President, BB&T Equipment Finance, said, “The outlook for U.S. companies has become much more positive since the presidential election. Lower taxes, less regulation and rising interest rates will be the catalyst to spur capital asset acquisitions. This will undoubtedly set the stage for robust equipment finance activity.”

January 2017 Survey results:

The overall MCI-EFI is 73.4, an increase from the December index of 67.5.

» When asked to assess their business conditions over the next four months, 74.2 percent of executives responding said they believe business conditions will improve over the next four months, an increase from 48.4 percent in December. 22.6 percent of respondents believe business conditions will remain the same over the next four months, a decrease from 45.2 percent in December. 3.2 percent believe business conditions will worsen, a decrease from 6.5 percent the previous month.

» 71.0 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 38.7 percent in December. 25.8 percent believe demand will “remain the same” during the same four-month time period, down from 54.8 percent the previous month. 3.2 percent believe demand will decline, down from 6.5 percent who believed so in December.

» 19.4 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 22.6 percent who expected more in December. 80.6 percent of executives indicate they expect the “same” access to capital to fund business, an increase from 77.4 percent the previous month. None expect “less” access to capital, unchanged from last month.

» When asked, 35.5 percent of the executives report they expect to hire more employees over the next four months, a decrease from 41.9 percent in December. 61.3 percent expect no change in headcount over the next four months, an increase from 48.4 percent last month. 3.2 percent expect to hire fewer employees, down from 9.7 percent in December.

» None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from last month. 100.0 percent of the leadership evaluate the current U.S. economy as “fair,” and none evaluate it as “poor,” both also unchanged from December.

» 61.3 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 71 percent in December. 38.7 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 25.8 percent the previous month. None believe economic conditions in the U.S. will worsen over the next six months, a decrease from 3.2 percent who believed so last month.

» In January, 58.1 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 48.4 percent in December. 41.9 percent believe there will be “no change” in business development spending, a decrease from 51.6 percent the previous month. None believe there will be a decrease in spending, unchanged from last month.

January 2017 MCI-EFI survey comments from industry executive leadership:

Bank, Small Ticket

“December new business volume and opportunity pipeline growth indicate increased capital investment activity and utilization of financing for acquisition. I view the rising rate environment as a positive indication and a shift from stagnation to a more normal economic cycle.” Robert Boyer, President, Susquehanna Commercial Finance, Inc.

Independent, Small Ticket

“Small business confidence is very high and we are optimistic that this will equate to more demand for capital expenditures. Hopefully, tax reform doesn’t create too much uncertainty.” David T. Schaefer, CEO, Mintaka Financial, LLC

Bank, Middle Ticket

“We continue to manage through a down cycle in the agriculture industry. We expect the cycle to bottom out in 2017, but do not expect improvement until mid-year 2018 or later. We continue to serve our mission and provide options to customers to help them work through the cycle.” Michael Romanowski, President, Farm Credit Leasing Services Corporation

Bank, Large Ticket

“Hope centers around regulatory reform in Washington. Concerns include the rise in the dollar, which could impact exports.” Thomas Partridge, President, Fifth Third Equipment Finance

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

How may I access the MCI-EFI?

Survey results are posted on the Foundation website, http:// www.leasefoundation.org/research/mci/, included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.

The Equipment Leasing & Finance Foundation is a 501c3 nonprofit organization dedicated to inspiring thoughtful innovation and contributing to the betterment of the equipment leasing and finance industry.