Equipment Finance Industry Confidence Reaches Highest Level Since 2018

According to the Equipment Leasing & Finance Foundation’s March 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 67.7, an increase from the February index of 64.4 and the highest level since April 2018.

“We are relatively positive on domestic and global economic activity for this year, and likely next,” David Drury, senior vice president and head of equipment finance at Fifth Third Bank, said. “Despite lingering disruptions, with the tailwinds of government stimulus, central bank liquidity, excess capacity and pent-up demand, global economic growth may positively surprise in 2021. The big question that could change our mind would be a return of inflation, which would change the dovish nature of most global central banks. Higher inflation would lead to higher interest rates and less of an incentive for businesses to borrow and invest.”

When asked to assess their business conditions over the next four months, 50% of executives said they believe business conditions will improve over the next four months, up from 46.2% in February. Meanwhile, 46.4% believe business conditions will remain the same over the next four months, unchanged from the previous month, and 3.6% believe business conditions will worsen, a decrease from 7.7% in February.

“The vaccine rollout is now progressing quickly, and while some predict we won’t see the end of this pandemic until year end, I believe everyone that wants a vaccine will be able to receive one by early May,” Bruce J. Winter, president of FSG Capital, said. “This bodes well for the return of strong economic activity that will almost certainly boost capital spending significantly.”

The survey revealed that 42.9% of respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months. In addition, 53.6% believe demand will “remain the same” during the same four-month time period and 3.6% believe demand will decline. All of these results were relatively unchanged from February.

“As COVID restrictions lift and companies have a clearer vision of future demand, it will help companies make more informed capex decisions,” Vincent Belcastro, group head of syndications at Element Fleet Management, said.

For the March survey, 28.6% of respondents said they expect more access to capital to fund equipment acquisitions over the next four months, up from 23.1% in February. The majority of executives (71.4%) said they expect the “same” access to capital to fund business, a decrease from 76.9% last month. None of the respondents expect “less” access to capital, unchanged from the previous month.

When asked, 42.9% of the executives said they expect to hire more employees over the next four months, up from 38.5% in February. Meanwhile, 57.1% expect no change in headcount over the next four months, a decrease from 61.5% last month. None of the respondents expect to hire fewer employees, unchanged from February.

Only 3.6% of the leadership evaluated the current U.S. economy as “excellent.” However, this was an increase after no executives evaluated the economy as “excellent” in the previous month. Most executives (78.6%) evaluated the current U.S. economy as “fair,” up from 76.9% in February, while 17.9% evaluated it as “poor,” down from 23.1% last month.

“The prospect of a broadly-vaccinated population should further push open state and local economies,” Adam Warner, president of Key Equipment Finance, said.

The majority of survey respondents (60.7%) believe U.S. economic conditions will get “better” over the next six months, an increase from 50% in February. In addition, 32.1% believe the U.S. economy will “stay the same” over the next six months, a decrease from 38.5% last month, and 7.1% believe economic conditions in the U.S. will worsen over the next six months, down from 11.5% the previous month.

In March, 39.3% of respondents said they believe their company will increase spending on business development activities during the next six months, up from 30.8% last month. Meanwhile, 60.7% believe there will be “no change” in business development spending, a decrease from 69.2% in February. None of the respondents said they believe there will be a decrease in spending, unchanged from last month.

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