The Equipment Leasing & Finance Foundation released the January 2024 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), which 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 48.6, an increase from the December index of 42.5.
“I expect that Wintrust will have a good year in the market, as we have stable liquidity, attractive cost of funds and an engaged and motivated team,” David Normandin, president and CEO of Wintrust Specialty Finance, said. “I expect to continue to see challenges in the overall economy as well as specific segments, and we are diversified and nimble to move to the opportunity. The leasing industry has historically performed better than other asset classes through tougher times because of the nimble and creative nature of the industry. I expect that the industry will come through this next couple years stronger having learned from our experiences.”
When asked to assess their business conditions over the next four months, 20.7% of the executives responding said they believe business conditions will improve over the next four months, an increase from 3.7% in December. Meanwhile, 62.1% believe business conditions will remain the same over the next four months, down from 66.7% the previous month, and 17.2% believe business conditions will worsen, a decrease from 29.6% in December.
In January, 13.8% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 3.7% in December, while 65.5% believe demand will “remain the same” during the same four-month time period, down from 74.1% last month. In addition, 20.7% believe demand will decline, a decrease from 22.2% in December.
“We still see demand for light and medium-duty trucks to satisfy ever-growing e-commerce business,” Jim DeFrank, executive vice president and chief operating officer of Isuzu Finance of America, said. “We also see thousands of light and medium-duty trucks waiting for bodies to be upfitted. When the body companies catch up with chassis awaiting upfitting, we will see a lot of opportunities for equipment finance companies in this sector over the next three to six months.”
According to the index, 13.8% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 3.7% in December, while 75.9% of executives indicated they expect the “same” access to capital to fund business, up from 74.1% last month, and 10.3% expect “less” access to capital, down from 22.2% last month.
When asked, 6.9% of the executives reported they expect to hire more employees over the next four months, a decrease from 18.5% in December, while 79.3% expect no change in headcount over the next four months, up from 63% last month, and13.8% expect to hire fewer employees, down from 18.5% in December.
None of the leadership evaluated the current U.S. economy as “excellent,” unchanged from last month. The majority of respondents (93.1%) evaluated the current U.S. economy as “fair,” up from 85.2% in December, while 6.9% evaluated it as “poor,” down from 14.8% last month.
According to the index, 13.8% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 3.7% in December, while 65.5% believe the U.S. economy will “stay the same” over the next six months, a decrease from 66.7% last month. In addition, 20.7% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 29.6% last month.
In January, 17.2% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 14.8% last month. Meanwhile, 65.5% believe there will be “no change” in business development spending, down from 66.7% in December, and 17.2% believe there will be a decrease in spending, down from 18.5% last month.
