According to the Equipment Leasing & Finance Foundation’s March 2017 Monthly Confidence Index, confidence in the equipment finance market is 71.1, easing from the February index of 72.2 but remaining among the highest levels of the last two years.
When asked about the outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, said, “The ‘Trump Effect’ appears to be having a positive impact on the equipment finance market. Customer demand has increased over 2016 levels. A positive outlook on taxes and regulation seems to have been the catalyst for increased capital expenditures. If the promises come to life it could be a banner year for the U.S. economy and the equipment finance industry.”
When asked to assess their business conditions over the next four months, 70% of executives responding said they believe business conditions will improve over the next four months, an increase from 69.2% in February. However, 10% believe business conditions will get worse, an increase from 3.8% the previous month.
A majority (70%) of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, an increase from 53.8% in February. There was also an increase on the other side, as 10% believe demand will decline, up from 3.8% who believed so in February.
“We are encouraged by continued loan/lease demand for equipment spends by our core client base, especially in the heavy equipment, marine and renewable energy sectors. Looking beyond the current softness of the rail sector, we feel demand will increase later in the year and beyond as older cars are retired,” said Frank J. Campagna, group vice president, line of business manager for M&T Bank Commercial Equipment Finance. “We continue to be challenged by what we feel are some irrational pricing pressures as too much money chases too few assets in certain sectors placing increased pressure on expenses and limiting some business development activity.”
Access to capital should remain largely the same or dip some, with 80% of executives expecting similar access, down from 84.6% last month while 3.3% expect less access, up from none in the previous survey.
When asked, 43.3% of the executives reported that they expect to hire more employees over the next four months, an increase from 42.3% in February. Meanwhile, 3.3% expect to hire fewer employees, down from 7.7% in February.
All survey respondents evaluated the current U.S. economy as fair and 60% believe that U.S. economic conditions will get better over the next six months, a decrease from 73.1% in February. However, that is more due to an expectation of a sustained pace, with 36.7% of survey respondents indicating they believe the U.S. economy will stay the same over the next six months, an increase from 26.9% the previous month.
“I am always optimistic about the equipment finance industry but concerned near term about the lack of clarity in Washington and this new administration’s inability to chart a course that resonates with the American public,” said Valerie Hayes Jester, president of Brandywine Capital Associates. “My hope is that the ‘dust settles’ and small business gets back to expansion and job creation.”
In March, 50% of respondents indicated that they believe their company will increase spending on business development activities during the next six months, a decrease from 65.4% in February. The other half believe there will be no change in business development spending, an increase from 34.6% the previous month.
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