Equipment Leasing Industry Confidence Eases Slightly in September

According to the Equipment Leasing & Finance Foundation’s September 2017 Monthly Confidence Index for the Equipment Finance Industry, confidence in the equipment finance market was 63.7, easing from the August index of 64.4.

When asked about the outlook for the future, survey respondent David Normandin, managing director of the Commercial Finance Group for Hanmi Bank, said, “The U.S. economy is showing signs of optimism in the small business sector. Combined with recent natural disasters, I believe that this creates an environment in which business will invest in opportunities for recovery. These opportunities will require equipment.”

When asked to assess their business conditions over the next four months, 29% of executives said they believe business conditions will improve over the next four months, a decrease from 38.2% in August. Meanwhile, 67.7% of respondents believe business conditions will remain the same over the next four months, an increase from 61.8% in August. A small percentage (3.2%) believe business conditions will worsen after no respondents indicated so in the previous index.

“Year to date we think clients have held back pending changes to tax policy. As tax policy appears less likely to happen this year, we do expect a pickup in activity in Q4. However, lack of consistent public policy is our biggest concern,” said Thomas Partridge, president of Fifth Third Equipment Finance.

More than a third (38.7%) of survey respondents believe demand for leases and loans to fund capital expenditures (CAPEX) will increase over the next four months, a slight increase from 38.2% in August. The majority (61.3%) believe demand will remain the same during the same four-month time period, up from 58.8% the previous month.

The vast majority (90.3%) of executives indicated they expect the same access to capital to fund business, up from 82.4% last month. The remaining respondents believe there will be more access to capital.

“We have been optimistic that the fourth quarter will experience an increase in activity,” said Valerie Hayes Jester, president of Brandywine Capital Associates. “I think the impact of the two hurricanes may be significant on near-term economic cycles. Additionally, the current lack of direction on tax and healthcare reform are not helping the small to midsize business feel comfortable to expand.”

When asked, 38.7% of the executives reported they expect to hire more employees over the next four months, a decrease from 41.2% in August. Most (58.1%) expect no change in headcount over the next four months, an increase from 55.9% last month. There was a marginal increase in those who 3.2% expect to hire fewer employees, with a reading of 3.2% compared to August’s 2.9%.

Nearly all respondents evaluated the current U.S. economy as fair (93.6%), while the other 6.5% evaluated it as excellent.

Nearly a quarter (22.6%) of the survey respondents believe that U.S. economic conditions will get better over the next six months, a decrease from 23.5% in August. Seventy one percent of survey respondents indicated they believe the U.S. economy will stay the same over the next six months, a decrease from 76.5% the previous month, while 6.5% believe economic conditions in the U.S. will worsen over the next six months, an increase from none who believed so in August.

“Preliminary economic data indicates 3% growth in GDP for the second quarter. This is obviously a positive indicator for the equipment finance industry,” said Thomas Jaschik, president of BB&T Equipment Finance. “However, U.S. businesses still remain cautious and continue to hold back on significant investments in their business pending a more affirmative outlook for the future. As such, I believe the industry will continue to experience moderate growth in the near term.”

In September, 45.2% of respondents indicated they believe their company will increase spending on business development activities during the next six months, an increase from 38.2% in August. Meanwhile, the other 54.8% believe there will be no change in business development spending, a decrease from 58.8% the previous month.

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