The Equipment Leasing & Finance Foundation released the February 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market is 51.7, an increase from the January index of 48.6.
“We believe there is a 50/50 chance of a recession this year, which will likely result in lower [capital expenditures (capex)] spending on equipment, at least in the first half or until interest rates decline,” Jeffry Elliott, CLFP, president of Huntington Equipment Finance, said. “However, following the significant delay in equipment acquisitions last year, we still expect considerable activity this year, as equipment wears out and replacement can be delayed only so long. The speed of onshoring and reshoring also will determine the demand for acquiring equipment or capex. Fortunately, long-term growth prospects for the United States and North America are strong, and we think the largest-ever expansion in our nation’s history is on the horizon.”
When asked to assess their business conditions over the next four months, 10.7% of the executives said they believe business conditions will improve over the next four months, a decrease from 20.7% in January, while 82.1% believe business conditions will remain the same over the next four months, up from 62.1% in January. In addition, 7.1% believe business conditions will worsen, a decrease from 17.2% in January.
Just 7.1% of the survey respondents believe demand for leases and loans to fund capex will increase over the next four months, down from 13.8% in January. Meanwhile, 78.6% believe demand will “remain the same” during the same four-month time period, up from 65.5% in January, while 14.3% believe demand will decline, a decrease from 20.7% in January.
In February, 14.3% of the respondents said they expect more access to capital to fund equipment acquisitions over the next four months, up from 13.8% in January, with 75% of executives indicating they expect the “same” access to capital to fund business, down from 75.9% last month. Additionally, 10.7% expect “less” access to capital, up slightly from 10.3% in January.
When asked, 21.4% of the executives reported they expect to hire more employees over the next four months, an increase from 6.9% in January, while 71.4% expect no change in headcount over the next four months, down from 79.3% last month, and 7.1% expect to hire fewer employees, down from 13.8% in January.
This month, 3.6% of the leadership evaluated the current U.S. economy as “excellent,” up from none in January, while 89.3% of the leadership evaluated the current U.S. economy as “fair,” down from 93.1% last month, and 7.1% evaluated it as “poor,” relatively unchanged from 6.9% last month.
When asked, 17.9% of the survey respondents said they believe U.S. economic conditions will get “better” over the next six months, up from 13.8% in January, while 67.9% believe the U.S. economy will “stay the same” over the next six months, an increase from 65.5% last month, and 14.3% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 20.7% in January.
In February, 21.4% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 17.2% last month. Meanwhile, 67.9% believe there will be “no change” in business development spending, up from 65.5% in January, and 10.7% believe there will be a decrease in spending, down from 17.2% last month.
“The U.S. economy is in transition and that brings opportunity to the creative and solution-oriented equipment finance and leasing companies in our industry,” David Normandin, president and CEO of Wintrust Specialty Finance, said. “Our ability to pivot, meet our customers’ needs, and quickly execute on opportunities will determine our success. The headwinds of rising bankruptcy filings, delinquency and overall portfolio performance trending to long term averages are a change to the incredible times our industry has had for over a decade. This shift will affect organizations’ commitment and harm some while helping others. I look forward to growth in 2024.”
