Equipment Finance Industry Confidence Eases in January

According to the most the January 2016 Monthly Confidence Index from the ELFF, confidence in the equipment finance market dropped to 54.0, a large step back from the 60.2 recorded in December.

“The equipment finance business is very industry diverse,” said Harry Kaplun, president of Specialty Finance at Frost Bank. “This diversity allows directional changes to the current growth sectors while still maintaining a presence in less robust sectors. Being nimble and adaptive continue to be key skills for success.”

When asked to assess their business conditions over the next four months, 10.7% of responding executives said they believe business conditions will improve over the next four months, a decrease from 12.5% in December. Meanwhile, 78.6% of respondents believe business conditions will remain the same over the next four months and 10.7% believe business conditions will worsen, a decrease from 12.5% the previous month.

While 10.7% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months (an increase from 8.3% in December), there was also an increase the other way, with 17.9% believing demand will decline, an increase from 12.5% in December.

Executives are less bullish about access to capital to fund equipment acquisitions with 17.9% of executives expecting more and 7.1% expecting less. Those numbers stood at 25% and 4.2%, respectively, in December.

“I believe there is a great deal of uncertainty in the near term. Rising interest rates, declining oil prices and the decelerating Chinese economy will create headwinds for capital investment in the U.S,” said Thomas Jaschik, president of BB&T Equipment Finance

In addition, 3.6% of the leadership evaluates the current U.S. economy as “excellent,” a decrease from 4.2% last month, while 3.6% rate it as “poor,” an increase from none the previous month.

Most executives do not expect the economy to perform better in the near term, with 3.6% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 8.3% in December. Additionally, 21.4% believe economic conditions in the U.S. will worsen over the next six months, an increase from 12.5% who believed so last month.

“Our year-end close was strong, but I worry, now that the new year has begun and China’s woes are affecting our stock market, just how this year will unfold,” said Valerie Hayes Jester, president of Brandywine Capital. “I still see small-business customers concerned about making non-essential equipment purchases and taking longer than normal to make decisions. The tax incentives that were reinstated and extended at the close of 2015 may help tip the scales in favor of investment.”

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