February Equipment Leasing Industry Confidence Falls Amid Uncertainty

According to the February 2016 Monthly Confidence Index from the Equipment Leasing & Finance Foundation, overall confidence in the market was 48.3, a rather sharp decrease from the January index of 54.0.

“Uncertainty on the international front and with energy markets is creating capital expenditure restraint. More clarity should emerge in the second half of 2016,” said Harry Kaplun, president of Specialty Finance at Frost Bank.

When asked to assess their business conditions over the next four months, 3.2% of executives responding said they believe business conditions will improve over the next four months, a decrease from 10.7% in January. In addition, 25.8% believe business conditions will get worse, up from 10.7% in January.

A small percentage of survey respondents (3.2%) believe demand for leases and loans to fund capital expenditures will increase over the next four months, a decrease from 10.7% in January. Additionally, 35.5% believe demand will decline, an increase from 17.9% in January.

“I think we are beginning to see a bit of a pullback in the small business space,” said David T. Schaefer, CEO of Mintaka Financial. “Even though application volume is steady, we are seeing fewer deals being closed. Seems like uncertainty about the economy is creeping in.”

Continuing the trend of decreased confidence, 16.1% of executives expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 17.9% in January, while 12.9% expect less access to capital, an increase from 7.1% last month.

None of the leadership evaluated the current U.S. economy as “excellent,” a decrease from 3.6% last month, although the percentage of respondents that rated the economy as “poor” (3.2%) remained largely the same. However, 25.8% of respondents believe economic conditions in the U.S. will get worse over the next six months, an increase from 21.4% in the previous month.

“A flat domestic economy, muffled by presidential election uncertainty, will subdue growth in our industry for 2016,” said Paul Menzel, president and CEO of Financial Pacific Leasing.

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