Confidence in Equipment Finance Market Increases from November

The Equipment Leasing & Finance Foundation recently released the December Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market is 45.9, an increase from the November index of 43.7.

“’Cautious optimism’ is the theme as we move into 2023. The Federal Reserve is signaling that rate increases are slowing down; yet, this move doesn’t outweigh the softening demand for equipment financing due to rates being so high as a result,” Adam Warner, president of Key Equipment Finance, said. “Businesses will need to continue moving forward regardless, and that means implementing new technology to increase productivity, efficiency and profitability.”

December 2022 Survey Results:

The overall MCI-EFI is 45.9, an increase from the November index of 43.7.

  • 7% of the executives responding said they believe business conditions will improve over the next four months, an increase from none in November. 55.6% believe business conditions will remain the same over the next four months, up from 46.4% the previous month. 40.7% believe business conditions will worsen, a decrease from 53.6% in November.
  • 4% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 10.7% in November. 70.4% believe demand will “remain the same” during the same four-month time period, an increase from 67.9% the previous month. 22.2% believe demand will decline, up from 21.4% in November.
  • 8% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 14.3% in November. 70.4% of executives indicate they expect the “same” access to capital to fund business, an increase from 64.3% last month. 14.8% expect “less” access to capital, down from 21.4% the previous month.
  • When asked, 33.3% of the executives report they expect to hire more employees over the next four months, up from 32.1% in November. 51.9% expect no change in headcount over the next four months, a decrease from 64.3% last month. 14.8% expect to hire fewer employees, up from 3.6% in November.
  • 7% of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month. 70.4% of the leadership evaluate the current U.S. economy as “fair,” down from 75% in November. 25.9% evaluate it as “poor,” an increase from 21.4% last month.
  • 2% indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 28.6% last month. 51.9% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 71.4% the previous month.
  • In December 37% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 28.6% the previous month. 59.3% believe there will be “no change” in business development spending, down from 64.3% in November. 3.7% believe there will be a decrease in spending, a decrease from 7.1% last month.

“The pent-up demand is still very strong. We see this continuing through Q2 2023.” Jim DeFrank, executive vice president and chief operating officer of Isuzu Finance of America, said.

“In this economy, cash is king and obtaining financing from traditional funding sources will only get more challenging.” James D. Jenks, CEO of Global Finance and Leasing Services, said.

“We are at an interesting crossroads as economists predict a looming recession and the Fed continues to raise interest rates to tame the inflation beast,” Michael Romanowski, president of Farm Credit Leasing, said. “Customers are sharpening the pencil on major expansion opportunities to ensure timing is right for investment. We continue to find solutions to provide value to our customers and markets in this challenging environment.”

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