ELFF: Equipment Finance Industry Confidence Rises Slightly in June

According to the Equipment Leasing & Finance Foundation’s June 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) overall confidence in the equipment finance market is 50.9, up from the May index of 49.6.

“Interest rates are a major concern. Uncertainties related to Fed action or inaction, as well as the continuing war in Ukraine will weigh heavily on the economy,” Glenn Davis, president of RESIDCO, said.

When asked to assess their business conditions over the next four months, 11.1% of executives responding said they believe business conditions will improve over the next four months, an increase from 6.9% in May. Meanwhile, 55.6% believe business conditions will remain the same over the next four months, down from 62.1% last month, and 33.3% believe business conditions will worsen, an increase from 31% in May.

“The equipment leasing and finance business adapts to change and finds ways to win in difficult environments.” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said. “The rising rate environment is a healthy change from the past decade and creates the opportunity to build margin back into business models and strengthen the community.”

According to the survey, 11.1% of the respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 10.3% in May, while 66.7% believe demand will “remain the same” during the same four-month time period, an increase from 65.5% last month, and 22.2% believe demand will decline, down from 24.1% in May.

“Supply chain issues continue to linger, especially with light duty trucks.” Michael Romanowski, president of Farm Credit Leasing, said. “We continue to see interest from our customers with large expansion projects to lock in rates while they remain at historically low levels.”

Just under a quarter (22.2%) of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 13.8% in May, while 77.8% of executives indicated they expect the “same” access to capital to fund business, a decrease from 86.2% last month. None expect “less” access to capital, unchanged from last month.

When asked, 29.6% of the executives reported they expect to hire more employees over the next four months, down from 48.3% in May, while 66.7% expect no change in headcount over the next four months, an increase from 44.8% last month, and 3.7% expect to hire fewer employees, down from 6.9% in May.

In June, 7.4% of the leadership evaluated the current U.S. economy as “excellent,” an increase from 3.5% the previous month, while 74.1% of the leadership evaluated the current U.S. economy as “fair,” down from 79.3% in May, and 18.5% evaluated it as “poor,” an increase from 17.2% last month.

“When the supply chain is repaired, and should demand evaporate, we will have a bigger issue than we do today,” James D. Jenks, CEO of Global Finance and Leasing Services, said.

This month, 7.4% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 3.5% in May, while 37% indicated they believe the U.S. economy will “stay the same” over the next six months, an increase from 27.6% last month, and 55.6% believe economic conditions in the United States will worsen over the next six months, a decrease from 69% last month.

In June, 40.7% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 34.5% the previous month, while 59.3% believe there will be “no change” in business development spending, down from 65.5% in May. None believe there will be a decrease in spending, unchanged from last month.

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