ELFF: Equipment Finance Industry Confidence Eases Further in May
MAY 17, 2018 - 7:40 am
The Equipment Leasing & Finance Foundation released the May 2018 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market eased further in May to 64.6, down from the April index of 68.3.
When asked about the outlook for the future, MCI-EFI survey respondent Michael Romanowski, president, Farm Credit Leasing Services, said, “Customers are continuing to work through the impacts of tax law changes and making decisions on how best to finance capital investments. Projects are beginning and we anticipate an increase in purchase leaseback activity in the last quarter of the year.”
When asked to assess their business conditions over the next four months, 22.2% of executives responding said they believe business conditions will improve over the next four months, down from 33.3% in April, while 74.1% of respondents believe business conditions will remain the same, a 63.3% month-over-month increase. Respondents who believe business conditions will worsen remained relatively unchanged at 3.7% from 3.3% in April.
On the topic of demand for leases and loans to fund capital expenditures, 29.6% of survey respondents believe CAPEX will increase over the next four months, a decrease from 46.7% in April, while 70.4% believe demand will remain the same, up from 50% the previous month. None believe demand will decline, a decrease from 3.3% in April.
“Demand is strong this spring. Small business seems determined to move forward and to keep investing in equipment that will produce income. In spite of the manic performance of Wall Street and the ongoing drama in Washington, Main Street America continues to stay the course,” said Valerie Hayes Jester, president, Brandywine Capital Associates.
Respondents expecting more access to capital to fund equipment acquisitions over the next four months represented 25.9% of the group, down slightly from 26.7% in April, while 74.1% of executives expect the same access, up from 73% last month. None expect less access to capital, unchanged from last month.
When asked, 44.4% of the executives expect to hire more employees over the next four months, a decrease from 46.7% in April, and 55.6% expect no change in headcount during the same period, an increase from 50% last month. None expect to hire fewer employees, down from 3.3% in April.
Evaluating the current U.S. economy, 22.2% of the leadership rated it as excellent, down from 30% last month, 77.8% evaluate it as fair, up from 70% in April and none evaluated it as poor, unchanged from last month.
Survey respondents believing the U.S. economic conditions will get better over the next six months represented 25.9%, down from 30% in April, while 70.4% believe the U.S. economy will stay the same over the next six months, an increase from 63.3% the previous month, and 3.7% believe economic conditions will worsen, down from 6.7% in April.
“Stronger economic conditions continue, and in spite of deterrents like rising interest rates, the advantages of tax reform offset them,” said Harry Kaplun, president of Specialty Finance, Frost Bank.
In May, 37% of respondents believed their company will increase spending on business development activities during the next six months, a decrease from 53.3% in April, while 63% believe there will be no change in business development spending, an increase from 43.3% the previous month. None believe there will be a decrease in spending, down from 3.3% last month.
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.