According to the Equipment Leasing & Finance Foundation’s January 2022 Monthly Confidence Index for the Equipment Finance Industry, overall confidence in the equipment finance market is 63.9, unchanged from the December 2021 index.
When asked about the outlook for the future, survey respondent Jim DeFrank, executive vice president and chief operating officer of Isuzu Finance of America, said, “It’s all about supply chain right now. There is demand for equipment, but manufactures are having a hard time satisfying the demand due to parts shortages, workforce issues, etc. Once the supply can match demand, we will see a nice increase in finance and leasing volumes, hopefully by the second half of 2022.”
When asked to assess their business conditions over the next four months, 25.9% of executives responding said they believe business conditions will improve over the next four months, a decrease from 34.6% in December, while 70.4% believe business conditions will remain the same over the next four months, up from 61.5% last month, and 3.7% believe business conditions will worsen, unchanged from December.
“While the seemingly never-ending pandemic, fueled by the omicron variant, is creating havoc in certain sectors, the industry enjoyed a strong year in FY 2021 and is positioned to prosper again in FY 2022,” Bruce J. Winter, president of FSG Capital, said. “Strong underwriting will be rewarded, and those that took too much risk may begin feeling the impact of deteriorating portfolio performance as government stimulus runs out. Competition will keep spreads tight, but increasing costs of funds will force lenders to slowly raise pricing throughout the year.”
Roughly a quarter (25.9%) of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 26.9% in December, while 70.4% believe demand will “remain the same” during the same four-month time period, a decrease from 73.1% last month, and 3.7% believe demand will decline, up from none in December.
“Supply chain issues continue to be our biggest headwind. With the Fed anticipating raising interest rates, we expect customers to lock in long-term financing at today’s low rates,” Michael Romanowski, president of Farm Credit Leasing, said.
In January, 21.4% of the respondents said they expect more access to capital to fund equipment acquisitions over the next four months, up from 19.2% in December, while 78.6% of executives indicated they expect the “same” access to capital to fund business, a decrease from 80.8% last month. None of the respondents expect “less” access to capital, unchanged from last month.
When asked, 39.3% of the executives said they expect to hire more employees over the next four months, down from 42.3% in December, while 60.7% expect no change in headcount over the next four months, an increase from 57.7% last month. None of the respondents said they expect to hire fewer employees in the next four months, unchanged from December.
This month, 14.8% of the respondents evaluated the current U.S. economy as “excellent,” a decrease from 19.2% last month, while 81.5% of the respondents evaluated the current U.S. economy as “fair,” up from 76.9% in December, and 3.7% evaluated it as “poor,” unchanged from last month.
When asked, 29.6% of survey respondents said they believe U.S. economic conditions will get “better” over the next six months, an increase from 19.2% in December, while 63% said they believe the U.S. economy will “stay the same” over the next six months, an increase from 61.5% last month, and 7.4% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 19.2% last month.
In January, 50% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 46.2% last month. The other half (50%) believe there will be “no change” in business development spending, down from 53.9% in December. None of the respondents believe there will be a decrease in spending on business development, unchanged from last month.
“2022 will be an interesting year with many challenges and headwinds that will create opportunities for organizations that are positioned well and are nimble enough to take advantage,” David Normandin, CLFP, president and CEO of Wintrust Specialty Finance, said.
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