ELFF: May 2016 Confidence Index Reflects Political Concerns



The Equipment Leasing & Finance Foundation released the May 2016 Monthly Confidence Index for the Equipment Finance Industry. 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. Overall, confidence in the equipment finance market eased to 55.1 from the April index of 59.1 after two consecutive months of increases. Concerns about the impact of the U.S. political scene were top of mind among respondents.

“The U.S. economy is stable with low interest rates serving as a prop. My concerns are with foreign economies and our own political landscape and how those will factor into the next 12 months,” said Paul Menzel, president & CEO, Financial Pacific Leasing.

When asked about the outlook for the future, MCI-EFI survey respondent Valerie Hayes Jester, president of Brandywine Capital Associates, said, “Application activity has been strong in the last 30 days, but I suspect that is pent-up demand from customers who delayed equipment purchases in the last quarter. Rates continue to be low and credit approvals are not a factor. It is more the reluctance of the small business owner to make expansion decisions given our current political environment that concerns me.”

The overall MCI-EFI is 55.1, a decrease from the April index of 59.1. Other May 2016 survey results are as follows:

  • When asked to assess their business conditions over the next four months, 16.1% of executives responding said they believe business conditions will improve over the next four months, an increase from 12.1% in April. Another 67.7% of respondents believe business conditions will remain the same over the next four months, a decrease from 75.8% in April. A 16.1% portion believe business conditions will worsen, an increase from 12.1% the previous month.
  • Just over 16% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 15.2% in April. A 61.3% portion believe demand will remain the same during the same four-month time period, down from 66.7% the previous month, while 22.6% believe demand will decline, an increase from 18.2% who believed so in April.
  • Approximately 19.4% of executives expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 24.2% in April. About 74.2% of survey respondents indicate they expect the same access to capital to fund business, a decrease from 75.8% the previous month, while 6.5% expect less access to capital, an increase from none last month.
  • When asked, 48.4% of the executives report they expect to hire more employees over the next four months, a decrease from 51.5% in April. An equal portion (48.4%) expect no change in headcount over the next four months, an increase from 45.5% last month, while 3.2% expect to hire fewer employees, relatively unchanged from April.
  • None of the leadership evaluates the current U.S. economy as excellent, a decrease from 3.0% last month.  An overwhelming 96.8% of the leadership evaluate the current U.S. economy as fair, relatively unchanged from April, while 3.2% rate it as poor, an increase from none the previous month.
  • About 6.5% of the survey respondents believe that U.S. economic conditions will improve over the next six months, an increase from 3.0% who believed so in April. Another 64.5% of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 87.9% the previous month, while 29.0% believe economic conditions in the U.S. will worsen over the next six months, an increase from 9.1% who believed so last month.
  • In May, 38.7% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 54.5% in April. Over 58% believe there will be no change in business development spending, an increase from 45.5% the previous month, while 3.2% believe there will be a decrease in spending, an increase from none who believed so last month.

“Originations have been strong but we are concerned that there are signs of a slow-down economically. This, combined with the political scene, makes us less optimistic than we have been these past few quarters,” said Mintaka Financial CEO David T. Schaefer.

“I look for the second quarter to show improved industry results over the first quarter, but less than 2015. I believe the second half of 2016 will have a bit more uncertainty as the presidential election draws near,” said BB&T Equipment Finance President Thomas Jaschik.


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