According to the Equipment Leasing & Finance Foundation’s May 2021 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 72.1, easing from April’s all-time high of 76.1.

“While vaccine ‘herd immunity’ may be unachievable, warmer weather, immunity provided by previous infections and over 105 million Americans fully vaccinated will allow most economic activity to resume at pre-pandemic levels this summer,” Bruce J. Winter, president of FSG Capital, said. “Business owners are much more optimistic and stimulus supported capital spending will likely reach unprecedented levels in the next 12 months. Prolonged inflation risk is a real concern, as this untested experiment in rapidly expanding government debt will reach new highs.”

When asked to assess their business conditions over the next four months, 53.6% of responding executives said they believe business conditions will improve over the next four months, down from 73.3% in April. Meanwhile, 46.4% of respondents believe business conditions will remain the same over the next four months, up from 23.3% last month. None of the respondents believe business conditions will worsen, down from 3.3% in April.

More than half (53.6%) of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 70% in April. The remaining 46.4% of respondents believe demand will “remain the same” during the same four-month time period, an increase from 30% the previous month. None of the respondents believe demand will decline, unchanged from April.

“We are seeing demand increase for capital expenditures, especially large facility expansions,” Michael Romanowski, president of Farm Credit Leasing, said. “Material and labor cost increases are requiring customers to sharpen the pencil to ensure investments remain prudent.”

Nearly a third (32.1%) of the respondents said they expect more access to capital to fund equipment acquisitions over the next four months, down from 43.3% in April. The majority (67.9%) of executives indicated they expect the “same” access to capital to fund business, an increase from 56.7% last month. None of the respondents expect “less” access to capital, unchanged from the previous month.

When asked, 39.3% of the executives reported they expect to hire more employees over the next four months, down from 43.3% in April. Meanwhile, 60.7% expect no change in headcount over the next four months, an increase from 56.7% last month. None of the respondents expect to hire fewer employees, unchanged from April.

Only 10.7% of the leadership evaluated the current U.S. economy as “excellent,” a decrease from 13.3% the previous month. Most of the leadership (89.3%) evaluated the current U.S. economy as “fair,” up from 80% in April. None of the respondents evaluated the current U.S. economy as “poor,” down from 6.7% last month.

Most of the survey respondents (60.7%) believe U.S. economic conditions will get “better” over the next six months, a decrease from 73.3% in April. Meanwhile, 39.3% indicated they believe the U.S. economy will “stay the same” over the next six months, an increase from 23.3% last month. None of the respondents believe economic conditions in the U.S. will worsen over the next six months, down from 3.3% last month.

In May, 53.6% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 46.7% last month. In addition, 42.9% of respondents believe there will be “no change” in business development spending, a decrease from 53.3% in April. Only 3.6% of respondents believe there will be a decrease in spending, up from none of the respondents last month.

“Near-term, the high level of liquidity generally available will continue to drive investor demand in our primary sectors,” Glenn Davis, president and CEO of RESIDCO, said. “A major concern over the short to intermediate term is the potential inflationary impact associated with that along with corresponding market pressures, which may adversely impact interest rates.”