Equipment Financing Confidence Down, Not Out, in December

Dec. 20, 2012
This reflects industry participants’ concerns regarding the impact of fiscal issues on capital expenditures.

According to the December 2012 Monthly Confidence Index for the $725 billion equipment finance sector, confidence dipped to 48.5 from the November index of 49.9. This reflects industry participants’ concerns regarding the impact of fiscal issues on capital expenditures, despite an overall sense of optimism among members of the Equipment Leasing & Finance Foundation.

Designed to collect leadership data, the Foundation’s index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives.

When asked about the outlook for the future, MCI survey respondent Russell Nelson, President, Farm Credit Leasing Services Corporation, said, “Regardless of actions or no action by Congress to address the fiscal cliff and extension of the Bush tax cuts, the equipment finance industry will be proactive in offering creative, innovative and reliable products and structures to retain its market share of financing needs, and remain an integral part of available finance solutions to all customers.”

December 2012 Survey Results:

When asked to assess their business conditions over the next four months, 5.9% of executives responding said they believe business conditions will improve over the next four months, down from 9.1% in November. 73.5% of respondents believe business conditions will remain the same over the next four months, up from 69.7% in November.  20.6% believe business conditions will worsen, down from 21.2% the previous month.

8.8% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 12.1% in November.  58.8% believe demand will “remain the same” during the same four-month time period, down from 63.6% the previous month. 32.4% believe demand will decline, up from 24.2% in November.

14.7% of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 21.2% in November. 85.3% of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 72.7% the previous month. No one expects “less” access to capital, down from 6.1% who expected less access to capital in November.

When asked, 23.5% of the executives reported they expect to hire more employees over the next four months, down from 33.3% in November.  64.7% expect no change in headcount over the next four months, up from 54.5% last month.  11.8% expect fewer employees, down from 12.1% of respondents who expected fewer employees in November.

76.5% of the leadership evaluates the current U.S. economy as “fair,” down from 78.8% last month.  23.5% rate it as “poor,” up from 21.2% in November.

11.8% of survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 6.1% in November.  55.9% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 66.7% in November.  32.4% believe economic conditions in the U.S. will worsen over the next six months, an increase from 27.3% who believed so last month.

In December, 35.3% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 27.3% in November. 58.8% believe there will be “no change” in business development spending, down from 63.6% last month, and 5.9% believe there will be a decrease in spending, down from 9.1% who believed so last month.

Survey Comments from Industry 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, Micro Ticket

“Our leasing industry is in fine shape.  However, the weak economy will continue to frustrate the growth aspirations of lessees and lessors until and unless our country gets its fiscal house in order.” Paul Menzel, President & CEO, Financial Pacific Leasing, LLC

Independent, Small Ticket

“I am optimistic about the future of the equipment finance industry.  We continue to provide capital to the commercial markets and to fill many gaps in the traditional "bank" driven lending process.  We have seen a late increase in business this month but expect that to be impacted in the New Year if the negotiations in Washington do not end successfully.”  Valerie Hayes Jester, President, Brandywine Capital Associates, Inc.

Bank, Middle Ticket

“U.S. businesses are taking a "wait and see" attitude with respect to capital expenditures due to the pending "fiscal cliff".  Until this issue is resolved the general economy and equipment finance activity will remain somewhat stagnant.”   Thomas Jaschik, President, BB&T Equipment Finance

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