Equipment Leasing Industry Confidence Remains Steady in October

According to the Equipment Leasing & Finance Foundation’s monthly index, confidence in the equipment finance market is 63.7 in October, unchanged from the September index.

When asked about the outlook for the future, survey respondent Harry Kaplun, president of specialty finance for Frost Bank, said, “Macroeconomic factors like unemployment, interest rates and corporate profitability continue to be favorable. Regionally, storm problems will cause some business interruption that will be overcome in time. A major future stimulant is tax reform, which is gaining momentum in Congress.”

When asked to assess their business conditions over the next four months, 40% of executives said they believe business conditions will improve over the next four months, an increase from 29% in September. The rest of the respondents (60%) believe business conditions will remain the same over the next four months, a decrease from 67.7% in September.

A little more than a third (36.7%) of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 38.7% in September. While the number of respondents who believe demand will remain the same was relatively flat, 3.3% believe demand will decline, an increase from none who believed so in September.

“Continued low interest rates coupled with positive economic growth will maintain capex needs to be financed,” said Paul Menzel, president and CEO of Financial Pacific Leasing. “The uncertain political environment on policy agenda may keep businesses cautious.”

There was a rise to 20% of the respondents who expect more access to capital to fund equipment acquisitions over the next four months, up from 9.7% in September. Still, the majority (80%) of executives indicated they expect the same access to capital to fund business.

“We expect many large solar and facility projects to wrap up in the fourth quarter,” said Michael Romanowski, president of Farm Credit Leasing Services. “We are seeing a pick-up in demand for equipment replacement and renewals as producers continue to manage through a low cash grain commodity market. We expect to see some delays in capital expenditures until the impact of tax reform is better articulated and understood.”

When asked, 33.3% of the executives reported they expect to hire more employees over the next four months, a decrease from 38.7% in September. More than 60% expect no change in headcount over the next four months, an increase from 58.1% last month. Meanwhile, 3.3% expect to hire fewer employees, relatively unchanged from 3.2% in September.

None of the leadership evaluate the current U.S. economy as excellent, down from 6.5% last month. All respondents evaluated the current U.S. economy as fair, up from 93.6% last month.

No respondents indicated a belief that economic conditions will worsen in the next six months, while 23.3% believe conditions will get better and 76.7% believe they will stay the same.

In October, 36.7% 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 September. The rest (63.3%) believe there will be no change in business development spending, an increase from 54.8% the previous month.

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Terry Mulreany
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