Equipment Leasing and Finance Industry Confidence Eases Further in August



According to the Equipment Leasing & Finance Foundation’s August release of the Monthly Confidence Index for the Equipment Finance Industry, confidence in the equipment finance market eased again in August to 60.7, down from the July index of 62.8.

When asked about the outlook for the future, Paul Menzel, CLFP, president and CEO of Financial Pacific Leasing, an Umpqua Bank company, said, “‘Uncertainty’ is the theme in the economy for the balance of 2018. Between the administration’s trade strategy, the mid-term elections and the president’s political challenges, decision makers are taking a wait-and-see approach to business investment.”

When asked to assess their business conditions over the next four months, 13.3% of executives said they believe business conditions will improve, a decrease from 19.4% in July. The majority (80%) of respondents believe business conditions will remain the same over the next four months, an increase from 77.4% the previous month. Nearly 7% believe business conditions will worsen, an increase from 3.2% who believed so the previous month.

Only 16.7% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 19.4% in July. Most (83.3%) believe demand will “remain the same” during the same four-month time period, an increase from 77.4% the previous month. None believe demand will decline, down from 3.2% who believed so in July.

“I think there remains pent-up demand for capital equipment, and strong economic activity bodes well for portfolio performance,” Quentin Cote, CLFP, president of Mintaka Financial, said. “My concerns are about the impact of trade wars on equipment manufacturers’ prices, and the politicization of Fed interest rate moves, which would lead to overheating and inflation.”

The number of respondents who expect more access to capital to fund equipment acquisitions (16.7%) was up slightly from July’s reading of 16.1%. Meanwhile, 83.3% of executives indicated they expect the “same” access to capital to fund business, a slight decrease from 83.9% last month.

“Our application rate and quality have remained steady over the typically slower summer months signaling a strong fourth quarter,” Valerie Hayes Jester, president of Brandywine Capital Associates, said. “Interest rates continue to be attractive even after earlier rate hikes. Businesses continue to expand at a strong rate and equipment finance continues to be a substantial component of that trend.”

When asked, 36.7% of the executives reported they expect to hire more employees over the next four months, a decrease from 45.2% in July. Staffs should remain steady generally, as 63.3% expect no change in headcount over the next four months, an increase from 51.6% last month. None expect to hire fewer employees, a decrease from 3.2% in July.

In the survey, 40% of the leadership evaluated the current U.S. economy as “excellent,” down from 41.9% last month. The majority (60%) of the leadership evaluated the current U.S. economy as “fair,” up from 58.1% in July. None evaluated it as “poor,” unchanged from last month.

There is some optimism, as 13.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a slight increase from 12.9% in July. However, 73.3% of survey respondents indicated they believe the U.S. economy will “stay the same” over the next six months, a decrease from 77.4% the previous month, while 13.3% believe economic conditions in the U.S. will worsen over the next six months, an increase from 9.7% in July.

In August, 33.3% of respondents indicated they believe their company will increase spending on business development activities during the next six months, a decrease from 45.2% in July. More respondents (66.7%) believe there will be “no change” in business development spending, an increase from 54.8% the previous month. None believe there will be a decrease in spending, unchanged from last month.

“Trade tariffs are having an impact on capital investment by customers. Some are continuing to move forward, others are delaying investment,” Michael Romanowski, president of Farm Credit Leasing Services, said. “Overall, we are seeing business activity slightly behind levels from a year ago.”

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