ELFF: Equipment Leasing Industry Confidence Eases in April  

According to the Equipment Leasing & Finance Foundation’s monthly index, confidence in the equipment finance market registered a reading of 65.8, easing from the March index of 71.1.

When asked about the outlook for the future, survey respondent Paul Menzel, president and CEO of Financial Pacific Leasing, said, “I believe our industry is in a good place given portfolio performance, access to capital and general economic stability. However, the supply and demand imbalance is causing spreads to stay compressed and credit requirements to be relaxed in order to meet growth expectations. This equation is not healthy in the long run.”

When asked to assess their business conditions over the next four months, 36.7% of executives said they believe business conditions will improve over the next four months, a notable decrease from the 70% who said so in March. However, this change was more indicative of a belief that things will remain the same, which 63.3% of respondents said. No respondents believe business conditions will worsen, a decrease from 10% the previous month.

There was also a large decrease in the number of executives who believe demand for leases and loans to fund capital expenditures (capex) will increase during the next four months, with a reading of 40% in April compared to a reading of 70% in March.

“Even though job growth slowed in March the long-term gains in jobs should drive equipment demand,” said David T. Schaefer, CEO of Mintaka Financial.

A large majority of executives (80%) expect the same access to capital to fund equipment acquisitions during the next four months, which is unchanged from March.

When asked, 40% of the executives reported that they expect to hire more employees over the next four months, a decrease from 43.3% in March. Meanwhile, 6.7% expect to hire fewer employees, up from 3.3% in March.

All respondents evaluated the current U.S. economy as fair, unchanged from last month. In addition, 46.7% of the survey respondents believe that U.S. economic conditions will get better over the next six months, a decrease from 60% in March. Stability is expected instead, with 53.3% of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, an increase from 36.7% the previous month.

“The specter of the national economy has become less of an issue. This has led to more optimism and capital expenditures for equipment,” said Harry Kaplun, president of specialty finance at Frost Bank.

In April, 46.7% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a slight decrease from 50% in March. That slight slip spilled into the camp of executives who believe there will be no change in spending, with 53.3% choosing that option, an increase from 50% the previous month.

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Terry Mulreany
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