Equipment Financiers Confident about 2012

As 2011 comes to a close, confidence in the equipment finance market is holding steady and optimism about the year ahead seems stable, according to the December 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI), released by The Equipment Leasing & Finance Foundation.

The Index rates overall confidence at 57.2, a nominal decrease from the November index of 57.4, indicating steadying optimism about business activity despite ongoing concerns about the global economic situation.

Designed to collect leadership data, the index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $628 billion equipment finance sector.

When asked about the outlook for the future, survey respondent Rick Remiker, president of Huntington Equipment Finance, said, “The equipment leasing and finance industry has held its own over the past few quarters and favorably weathered several macroeconomic challenges. 2012 may bring greater opportunities as companies replace aged equipment and invest in newer technology and expanded capacity.”

When asked to assess their business conditions over the next four months, 22.2% of executives responding said they believe business conditions will improve over the next four months, up from 18.9% in November. 75.0% of respondents believe business conditions will remain the same over the next four months, relatively unchanged from 75.7% in November. 2.8% of executives believe business conditions will worsten, a slight increase from 2.0% in November.

19.4% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 24.3% in November. 80.6% believe demand will “remain the same” during the same four-month time period, up from 70.3% the previous month. No one believes demand will decline, down from 5.4% who believed so in November.

22.2% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 27.0% in November. 75.0% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 73.0% the previous month. 2.8% of survey respondents expect “less” access to capital, up from zero percent in November.

When asked, 22.2% of the executives reported they expect to hire more employees over the next four months, up from 16.2% in November. 69.4% expect no change in headcount over the next four months, a decrease from 75.7% last month, while 8.3% expect fewer employees, relatively unchanged from 8.1% in November.

75.0% of the leadership evaluates the current U.S. economy as “fair,” down slightly from 75.7% last month. 25.0% rate it as “poor,” up slightly from 24.3% in November.

19.4% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 13.5% in November. 77.8% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 86.5% in November. 2.8% responded that they believe economic conditions in the U.S. will worsen over the next six months, an increase from no one who believed so last month.

In December, 22.2% of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 32.4% in November. 77.8% believe there will be “no change” in business development spending, up from 67.6% last month, and no one believes there will be a decrease in spending, unchanged from last month.

Industry Executive Leadership comments:

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

Bank, Middle Ticket
“Fear in Europe and its global economic impact, the inability of Congress to agree on deficit reduction matters, and the failure of the Super Committee, combined with an election year, lead me to believe that the demand for new capex will continue to be limited. Any high-quality borrowers will find attractive transactions as lenders need assets and they will drive down their spreads and become more relaxed on structure to win the deal.” Executive, Middle Ticket, Bank

Bank, Middle Ticket
“The long-term future is okay as businesses must continue to finance acquisitions. I am concerned that in the short term people are continuing to delay capital expenditures.” Elaine Temple, President, Bancorpsouth Equipment Finance

Independent, Small Ticket
“The overshadowing of the European financial problems dampens my optimism for the U.S. economy over the next 12-18 months. There are positive signs the U.S. economy is improving, but [there is] concern about how a banking crisis in Europe will affect the U.S. economy and bank liquidity.” William H. Besgen, President and COO, Hitachi Capital America Corp.

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