Equipment Finance Industry Confidence Declines in June

JUN 21, 2011 - 9:39 am

The June 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) released by the Equipment Leasing & Finance Foundation (the Foundation) indicates that overall, confidence in the equipment finance market is 52.6, down from the May index of 63.2, indicating lingering industry concerns over the sputtering economic recovery and uncertainties in lease accounting changes.

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 $521 billion equipment finance sector.

When asked about the outlook for the future, survey respondent Thomas Jaschik, president, BB&T Equipment Finance, said, “I expect new business volume will gradually increase over the next two years. However, I do not anticipate volume levels returning to pre-recessionary levels in the near term. Market reaction to potential changes in lease accounting is unknown at this point.”

Other June 2011 survey results include:

The overall MCI-EFI is 52.6, a decrease from the May index of 63.2.

When asked to assess their business conditions over the next four months, 5.0% of executives responding said they believe business conditions will improve over the next four months, a decrease from 30% in May. 79.5% of respondents believe business conditions will remain the same over the next four months, an increase from 70% in May. 15.4% of executives believe business conditions will worsen.

12.8% of survey respondents believe demand for leases and loans to fund capital expenditures (CAPEX) will increase over the next four months, a decrease from 22% in May. 77% believe demand will “remain the same” during the same four-month time period, a slight decrease from 78% the previous month. 10% believe demand will decline.

23% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 44% in May. 77% of survey respondents indicate they expect the “same” access to capital to fund business, up from 56% the previous month. In the last seven months’ surveys, no one responded that they expect “less” access to capital.

When asked, 33.3% of the executives reported they expect to hire more employees over the next four months, down from 41% in May. 53.8% expect no change in headcount over the next four months, an increase from 52% last month, while 12.8% expect fewer employees, an increase from 7.0% in May.

66.7% of the leadership evaluate the current U.S. economy as “fair,” down from 93% who did in May. 33.3% rate it as “poor,” up from 7.0% last month.

Five percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 30% in May. 82% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 63% in May. 12.8% responded that they believe economic conditions in the U.S. will worsen over the next six months, up from 7.0% who believed so last month.

In June, 28% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 37% in May. 69% believe there will be “no change” in business development spending, up from 56% last month, and 2.6% believe there will be a decrease in spending, down from 7.0% who believed so last month.

June 2011 MCI Survey Comments from Industry Executive Leadership:

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

Independent, Large Ticket

An executive of a large-ticket Independent is “generally optimistic as capex spending and refinancing have been steady the last six months.”

Bank, Middle Ticket

“New business volume growth is continuing but it is a fragile trend that could cease. Much of the growth is replacement equipment with some equipment acquisitions for business expansion.” Harry Kaplun, president, Frost Leasing

Independent, Small Ticket

“We are in a long slow recovery and the small business owner has been most affected by declining home prices and continued weaker demand for their products and services. This has affected the markets we serve. Until some of these factors stabilize and the trend is reversed we will continue to see weak demand for equipment acquisitions.” Valerie Jester Hayes, president, Brandywine Capital Associatesp.

To read the entire press release click here.

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Equipment Finance Industry Confidence Declines in June

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