Equipment Financers More Confident About Economy

Judging by equipment leasing activity, optimism about business activity is on the rise, despite ongoing concerns about the global economic situation. According to the Equipment Leasing & Finance Foundation’s November 2011 Confidence Index, confidence in the equipment finance market is 57.4—up from the October index of 50.7.

When asked about his outlook for the future, survey respondent Thomas Jaschik, president of BB&T Equipment Finance, said, “For 2011 the industry is doing surprisingly well given the lackluster U.S. economy. The strong 2011 results for the industry can be attributed to historically low interest rates and the availability of 100 percent bonus depreciation. Whether this momentum can be sustained in 2012 is still a question mark.”

When asked to assess their business conditions over the next four months, 18.9% of executives responding said they believe business conditions will improve over the next four months, up from 9.8% in October. 75.7% of respondents believe business conditions will remain the same over the next four months, a decrease from 80.5% in October. 2.0% of executives believe business conditions will worsten, a decrease from 9.8% in October.

24.3% of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, an increase from 17.1% in October. 70.3% believe demand will “remain the same” during the same four-month time period, up from 68.3% the previous month. 5.4% believe demand will decline, down from 14.6% who believed so in October.

27.0% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 12.2% in October. 73.0% of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 87.8% the previous month. No survey respondents expect “less” access to capital, unchanged from October.

75.7% of the leadership evaluates the current U.S. economy as “fair,” an increase from 58.5% last month. 24.3% rate it as “poor,” down from 41.5% in October.

13.5% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 4.9% in October. 86.5% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 78.0% in October. No one responded that they believe economic conditions in the U.S. will worsen over the next six months, an improvement from 17.1% who believed so last month.

In November, 32.4% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 26.8% in October. 67.6% believe there will be “no change” in business development spending, down from 68.3% last month, and no one believes there will be a decrease in spending, down from 4.9% one who believed so last month.

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

“Business activity remains steady despite the headline news about a potential double dip and economic head winds,” said an executive representing the Large Ticket, Bank category.

An executive from the middle ticket, bank category was cautious in his optimism but expected current economic conditions to improve modestly over the next 6-18 months. “Continued pent-up demand, the need to replace equipment in the near term and a favorable interest rate climate should drive continued increases in equipment finance volume,” said Russell Nelson, president of Farm Credit Leasing Services Corporation.

Valerie Hayes Jester, president of Brandywine Capital Associates, Inc., representing the independent, small ticket category, said his segment seems to be faring better than most others in the commercial lending markets. “We are beginning to see business expansion for some of our clients,” she said. “We are also experiencing some level of a stronger cycle of equipment replacement underway.”

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