Equipment Finance Industry Confidence Steady in November

According to the Equipment Leasing & Finance Foundation’s November 2023 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), overall confidence in the equipment finance market is 42.8, an increase from the October index of 40.1.

“The depth of geopolitical uncertainty and our own domestic political uncertainty will have a significant impact on how the economy and our industry fare over the next 6-12 months,” Sean Duffy, CFO of Global Financial & Leasing Services, said.

When asked to assess their business conditions over the next four months, none of the executives responding said they believe business conditions will improve over the next four months, a decrease from 3.7% in October, while 74.1% believe business conditions will remain the same over the next four months, unchanged from last month, and 25.9% believe business conditions will worsen, an increase from 22.2% in October.

None of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 3.7% in October, while 74.1% believe demand will “remain the same” during the same four-month time period, a decrease from 77.8% Last month. Meanwhile, 25.9% believe demand will decline, an increase from 18.5% in October.

“Customers seem to be getting accustomed to the current interest rate environment and the idea that rates may not be coming down for a while,” Jason Lueders, president of Farm Credit Leasing, said. “This, combined with the continued draw-down of cash reserves, could lead to increased lease demand going forward, but we will need to keep a closer eye on repayment capacity.”

According to the survey, 11.1% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 14.8% in October, while 74.1% of executives indicated they expect the “same” access to capital to fund business, up from 70.4% last month, and 14.8% expect “less” access to capital, unchanged from last month.

“As the equipment leasing and finance industry heads to the end of year, there will continue to be demand for financing, and the organizations with liquidity will have solid new originations,” David Normandin, president and CEO of Wintrust Specialty Finance, said. “Portfolios continue to perform in most sectors at strong historic rates. I think we are heading into a slowdown in 2024, and rates will fall during this slowdown, but for now, there is opportunity.”

When asked, 14.8% of the executives reported they expect to hire more employees over the next four months, unchanged from October, while 77.8% expect no change in headcount over the next four months, up from 70.4% last month, and 7.4% expect to hire fewer employees, down from 14.8% in October.

In November, 3.7% of the leadership evaluated the current U.S. economy as “excellent,” an increase from none in October, while 81.5% of the leadership evaluated the current U.S. economy as “fair,” down from 92.6% in October, and 14.8% evaluated it as “poor,” up from 7.4% last month.

According to the survey, 3.7% of the respondents believe that U.S. economic conditions will get “better” over the next six months, relatively unchanged from 3.9% in October, while 44.4% indicated they believe the U.S. economy will “stay the same” over the next six months, a decrease from 57.7% last month, and 51.9% believe economic conditions in the U.S. will worsen over the next six months, an increase from 38.5% last month.

In November, 14.8% of respondents indicated they believe their company will increase spending on business development activities during the next six months, up from 11.1% last month, while 70.4% believe there will be “no change” in business development spending, down from 77.8% in October, and 14.8% believe there will be a decrease in spending, an increase from 11.1% last month.

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