Overall confidence in the $827 billion equipment finance sector is 56.9, an increase from the October index of 54.0, according to the Equipment Leasing & Finance Foundation’s November 2013 Monthly Confidence Index. This demonstrates an overall steady industry outlook despite continuing concerns about the U.S. economy and the negative impact of federal government fiscal policies, industry executives believe.
When asked about the outlook for the future, MCI survey respondent Russell Nelson, President, CoBank Farm Credit Leasing, said, “Continued stability and modest growth in the economy combined with increased strength in customer balance sheets, low interest rates, and pent-up demand for replacement/new assets for 2014 and beyond will generate double digit growth for equipment and facility financing over the next 18 to 24 months.”
November 2013 Survey Results
When asked to assess their business conditions over the next four months, 17.2% of executives responding said they believe business conditions will improve over the next four months, up from 11% in October. 79.3% of respondents believe business conditions will remain the same over the next four months, up from 74% in October. 3.4% believe business conditions will worsen, down from 15% who believed so the previous month.
13.8% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 7.4% in October. 75.9% believe demand will “remain the same” during the same four-month time period, down from 77.8% the previous month. 10.3% believe demand will decline, down from 15% who believed so in October.
24% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 18.5% in October. 72.4% of survey respondents indicate they expect the “same” access to capital to fund business, down from 81.8% in October. 3.4% expect “less” access to capital, up from no one who expected less access in October.
When asked, 27.6% of the executives reported they expect to hire more employees over the next four months, a decrease from 33.3% in October. 65.5% expect no change in headcount over the next four months, down slightly from 66.7% last month. 6.9% expect fewer employees, up from no one who expected fewer employees in October.
6.9% of the leadership evaluates the current U.S. economy as “excellent,” up from no one who believed so last month. 75.9% of the leadership evaluates the current U.S. economy as “fair,” down from 85.2% last month. 17.2 % rate it as “poor,” up from 15% in October.
17.2% of the of survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from no one who believed so in October. 72.4% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 89% in October. 10.3% believe economic conditions in the U.S. will worsen over the next six months, relatively unchanged from last month.
In November, 34.5% of respondents indicate they believe their company will increase spending on business development activities during the next six months, a slight increase from 33.3% in October. 65.5% believe there will be “no change” in business development spending, also a slight increase from 66.7% last month. No one believes there will be a decrease in spending, unchanged from October.
Comments from Executive Leadership
Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.
Independent, Small Ticket
“The industry continues to perform well with historic low delinquency rates. Demand has increased slightly as the end-of- the-year push for transaction closings is in process. We would believe that demand will remain at lower levels until issues regarding the budget crisis and healthcare insurance are fully resolved.”--Valerie Hayes Jester, President, Brandywine Capital Associates, Inc.
Bank, Middle Ticket
“The Equipment Leasing and Finance Association’s Monthly Leasing and Finance Index has continued its downward trend since the beginning of the second quarter, in tandem with the general direction of the economy and investment in capital equipment. With no real leadership coming from Washington, this lackluster performance is likely to continue for the foreseeable future.”--Thomas Jaschik, President, BB&T Equipment Finance
Bank, Middle Ticket
“We are starting to see some slowdown in several sectors, but growth is still happening.”--Harry Kaplun, President, Frost Equipment Leasing and Finance