According to the Equipment Leasing & Finance Foundation’s monthly index (MCI-EFI), confidence in the equipment finance market is 73.2 in February, easing from 75.3 in January, which was an all-time high level for the index.
“Our strong start to the year could be tempered with the recent volatility of the stock market and overall fears of rate increases,” said Valerie Hayes Jester, president of Brandywine Capital Associates. “I believe by the end of the quarter we will have a strong picture regarding demand for the year. At this point, indications look favorable for continued positive trends in equipment acquisition and for financing for those transactions.”
When asked to assess their business conditions over the next four months, 46.4% of executives said they believe business conditions will improve over the next four months, a decrease from 67.7% in January. Most (53.6%) respondents believe business conditions will remain the same over the next four months, an increase from 29.0% the previous month.
“Tax reform and general market conditions have driven confidence levels very high,” said David Normandin, managing director of the Commercial Finance Group at Hanmi Bank.
Roughly two-thirds (67.6%) of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, relatively unchanged from 67.7% in January. The rest of the respondents believe demand will remain the same during the same four-month time period.
Slightly more than a quarter (28.6%) of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 35.5% in January. Meanwhile, 67.9% of executives indicated they expect the same access to capital to fund business, an increase from 61.3% last month. Only 3.6% expect less access to capital, up from 3.2% last month.
When asked, 42.9% of executives reported they expect to hire more employees over the next four months, a slight increase from 41.9% in January. Most (53.6%) expect no change in headcount over the next four months, a decrease from 54.8% last month. There was also minimal change in the number of respondents who expect to hire fewer employees.
Exactly 25.0% of the leadership evaluated the current U.S. economy as excellent, just down from 25.8% last month. The remaining 75.0% of the leadership evaluated the current U.S. economy as fair, up from 74.2% in January.
“Fundamentals in the United States and around the world are stable, which will provide a good business environment for financial services. Yet to be determined are the impacts of tax reform on capex and rising interest rates on markets in general,” said Paul Menzel, president and CEO of Financial Pacific Leasing.
Optimism remains elevated, with 60.7% of the survey respondents believing that U.S. economic conditions will get better over the next six months, although that is a decrease from 61.3% in January. In addition, 35.7% of survey respondents indicated they believe the U.S. economy will stay the same over the next six months, a decrease from 38.7% the previous month, while 3.6% believe economic conditions in the U.S. will worsen over the next six months, an increase from none in January.
In February, 53.6% of respondents indicated their company will increase spending on business development activities during the next six months, a decrease from 61.3% in January. The rest (46.4%) believe there will be no change in business development spending, an increase from 35.5% the previous month.
“We are actively talking with partners and customers regarding the impact of tax reform and how best to structure transactions to meet their business objectives and maximize the benefits of tax reform. We expect this year to be a transition year to the ‘New Normal,’” said Michael Romanowski, president of Farm Credit Leasing Services.
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