Equipment Leasing and Finance Industry Less Confident in April

The Equipment Leasing & Finance Foundation released its April 2018 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market eased again in April to 68.3, down from the March index of 72.2.

“Business conditions are very positive and we expect this to continue,” said MCI-EFI survey respondent David T. Schaefer, CEO of Mintaka Financial. “We are watching the escalating trade tensions to better understand the ramifications. Overall we are bullish on 2018.”

When asked to assess their business conditions over the next four months, 33.3% of executives said they believe business conditions will improve over the next four months, a decrease from 54.8% in March. The majority (63.3%) of respondents believe business conditions will remain the same over the next four months, an increase from 45.2% the previous month. Only 3.3% believe business conditions will worsen, an increase from none who believed so the previous month.

Nearly half (46.7%) of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, a decrease from 67.7% in March. Meanwhile, exactly 50% believe demand will remain the same during the same four-month time period, an increase from 32.3% the previous month. Only 3.3% believe demand will decline, an increase from none in March.

A little more than a quarter (26.7%) of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 22.6% in March. The vast majority (73.0%) of executives indicated they expect the same access to capital to fund business, a decrease from 74.2% last month.

“High confidence levels and rising interest rates are fundamentally good for our business,” said David Normandin, managing director of the Commercial Finance Group at Hanmi Bank. “The market is slow to accept the reality of rising rates, thus we will continue to have short term yield compression.”

When asked, 46.7% of the executives reported they expect to hire more employees over the next four months, an increase from 41.9% in March. A similar amount (50%) expect no change in headcount over the next four months, a slight decrease from 51.6% last month. Only 3.3% expect to hire fewer employees, down from 6.5% in March.

Most executives evaluated the U.S. economy as fair (705), with the remaining respondents calling it excellent (30%).

In addition, 30% of the survey respondents believe that U.S. economic conditions will get better over the next six months, a decrease from 45.2% in March, while 63.3% indicated they believe the U.S. economy will stay the same over the next six months, an increase from 51.6% the previous month. At the same time, 6.7% believe economic conditions in the U.S. will worsen over the next six months, an increase from 3.2% in March.

“The recent increase in interest rates has had a positive impact on demand for our products, clearly indicating that transactions need to be finalized,” said Valerie Hayes Jester, president of Brandywine Capital Associates. “Our concerns center more on the manic policies of this administration as it relates to trade and how those decisions impact our economy. The stock market is reflective of the emotions businesses and investors are feeling.”

In April, 53.3% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 51.6% in March. Elsewhere, 43.3% believe there will be no change in business development spending, a decrease from 45.2% the previous month. Lastly, 3.3% believe there will be a decrease in spending, relatively unchanged from 3.2% who believed so last month.

“We are still working through the transition with customers to the new normal of tax reform,” said Michael Romanowski, president of Farm Credit Leasing Services. “We continue to see a lot of confusion in the marketplace.”

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