Equipment Finance Industry Confidence Holds Steady in December

The Equipment Leasing & Finance Foundation (the Foundation) releases the December 2011 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today.

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.  Overall, confidence in the equipment finance market is 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.
 
When asked about the outlook for the future, survey respondent Rick Remiker, President, 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.”

December 2011 Survey Results:
The overall MCI-EFI is 57.2, a decrease from the November index of 57.4.

•         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 worsen, 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.  


December 2011 MCI 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.

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.

Why an MCI-EFI?Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.

Who participates in the MCI-EFI: The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies.  The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity.  Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry's confidence.

How is the MCI-EFI designed? The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
1.    Current business conditions
2.    Expected product demand over the next four months
3.    Access to capital over the next four months
4.    Future employment conditions
5.    Evaluation of the current U.S. economy
6.    U.S. economic conditions over the next six months
7.    Business development spending expectations
8.    Open-ended question for comment

How may I access the MCI-EFI?: Survey results are posted on the Foundation website, http://www.leasefoundation.org/IndRsrcs/MCI/, included in the Foundation Forecast newsletter and included in press releases.   Survey respondent demographics and additional information about the MCI are also available at the link above.