Equipment Leasing and Finance Industry Confidence Eases Further in May

According to the May 2017 release of the Equipment Leasing & Finance Foundation’s monthly confidence index, confidence in the equipment finance market eased again in May to 63.2, down from the April index of 65.8.

When asked about the outlook for the future, survey respondent Valerie Hayes Jester, president of Brandywine Capital Associates, said, “Stronger demand has returned to our marketplace. I think the waiting game played by many small businesses in the first quarter has ended and demand is flowing more freely again. The changes to healthcare legislation may slow this down a bit, but I am optimistic that the year will end well.”

When asked to assess their business conditions over the next four months, 22.6% of executives said they believe business conditions will improve, a decrease from 36.7% in April. Meanwhile, 71% of respondents believe business conditions will remain the same over the next four months, an increase from 63.3% in April, and 6.5% believe business conditions will worsen, an increase from none the previous month.

Roughly 39% of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, a decrease from 40% in April. There was also a marginal decrease in those who believe demand will remain the same, with May’s reading at 54.8% compared to 56.7% the previous month. That corresponded with 6.5% who believe demand will decline, up from 3.3% who believed so in April.

“We saw a definitive change in client attitude regarding CAPEX spending in the past 30 days resulting in pipeline declines for both tax and non-tax financing. We believe that this is fueled by a very uncertain political climate. The financing industry is thus impacted by the fact that most institutions have high capital levels with a need to invest it, leading to lower return on equity and higher risk profiles as a result of chasing too few opportunities in the marketplace,” said Frank J. Campagna, group vice president and line of business manager for M&T Bank Commercial Equipment Finance.

A majority of respondents expect the same access to capital to fund businesses (83.9%), up from 80% last month while 12.9% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 16.7% in April. The number who expect less access (3.2%) was unchanged.

When asked, 45.2% of the executives report they expect to hire more employees over the next four months, an increase from 40% in April. Meanwhile, 51.6% expect no change in headcount over the next four months, a decrease from 53.3% last month. Additionally, 3.2% expect to hire fewer employees, down from 6.7% in April.

All respondents rated the U.S. economy as fair, which is in line with sentiment from last month.

“The historically slow but steady economic growth should get a boost from tax reform,” said Harry Kaplun, president of specialty finance at Frost Bank

Nearly 42% the survey respondents believe that U.S. economic conditions will get better over the next six months, a decrease from 46.7% in April. Just over half (51.6%) of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 53.3% the previous month. In addition, 6.5% believe economic conditions in the U.S. will worsen over the next six months, up from none who believed so last month.

In May, 45.2% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 46.7% in April. Meanwhile, 51.6% believe there will be no change in business development spending, a decrease from 53.3% the previous month and 3.2% believe there will be a decrease in spending, up from none last month.

“Rates still remain good by historical standards. The lack of movement in tax reform and healthcare policy is impacting investment decisions,” said Thomas Partridge, president of Fifth Third Equipment Finance.

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