The Equipment Leasing & Finance Foundation (the Foundation) has released the April 2020 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). 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 $900 billion equipment finance sector. Overall, confidence in the equipment finance market fell to a historic low in April of 22.3, decreasing from the previous low of 46 in the March index.
When asked about the outlook for the future, MCI-EFI survey respondent Michael DiCecco, executive vice president, Huntington Asset Finance, states, “During these uncertain times, I remain optimistic about the future of the equipment leasing and finance industry. While production is likely to soften in the short term, in many ways we have a great opportunity to affirm our value to our existing clients and demonstrate our value to new ones. It’s an important time to stay close to our clients.”
April 2020 Survey Results:
The overall MCI-EFI is 22.3, a decrease from 46 in March.
- When asked to assess their business conditions over the next four months, 6.9 percent of executives responding said they believe business conditions will improve over the next four months, up from 3.7 percent in March. None believe business conditions will remain the same over the next four months, a decrease from 48.2 percent the previous month. 93.1 percent believe business conditions will worsen, an increase from 48.2 percent in March.
- 6.9 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 3.7 percent in March. 3.5 percent believe demand will remain the same during the same four-month time period, a decrease from 59.3 percent the previous month. 89.7 percent believe demand will decline, an increase from 37 percent in March.
- None of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 14.8 percent in March. 53.6 percent of executives indicate they expect the same access to capital to fund business, a decrease from 77.8 percent last month. 46.4 percent expect less access to capital, an increase from 7.4 percent the previous month.
- When asked, 6.9 percent of the executives report they expect to hire more employees over the next four months, a decrease from 29.6 percent in March. 69 percent expect no change in headcount over the next four months, an increase from 66.7 percent last month. 24.1 percent expect to hire fewer employees, down from 3.7 percent the previous month.
- None of the leadership evaluate the current U.S. economy as excellent, down from 18.5 percent the previous month. None of the leadership evaluate the current U.S. economy as fair, down from 77.8 percent in March. 100 percent evaluate it as poor, up from 3.7 percent last month.
- 27.6 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, an increase from 14.8 percent in March. 6.9 percent indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 37 percent last month. 65.5 percent believe economic conditions in the U.S. will worsen over the next six months, up from 48.2 percent the previous month.
- In April, 17.2 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 22.2 percent last month. 48.3 percent believe there will be no change in business development spending, down from 70.4 percent in March. 34.5 percent believe there will be a decrease in spending, an increase from 7.4 percent last month.
April 2020 MCI-EFI Survey Comments from Industry Executive Leadership:
Bank, Small Ticket
“I am grateful for the strong liquidity of Wintrust during this rough period. I am concerned that if businesses do not get back to work soon, they will be detrimentally impacted,” states David Normandin, CLFP, president and CEO, Wintrust Specialty Finance.
Bank, Middle Ticket
“We are assessing the impact of COVID-19 on our customers’ capital investment. We expect impacts related to equipment and labor shortages. The industries we serve, agriculture and rural infrastructure, are paramount to supporting the nation as we traverse through this crisis, and we expect investment to continue and perhaps expand over the next 12 months,” says Michael Romanowski, president, Farm Credit Leasing.
Independent, Middle Ticket
“COVID-19 has created an environment that few expected, and none truly planned for. We are optimistic for a ‘V’ shaped economic cycle, which we believe can only be achieved if the health crisis is first solved. Otherwise, a prolonged COVID-19 shutdown will create a domino effect of business failures, more unemployment and unprecedented losses not only in our industry, but worldwide,” says Bruce J. Winter, president, FSG Capital Inc.
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:
- Current business conditions
- Expected product demand over the next four months
- Access to capital over the next four months
- Future employment conditions
- Evaluation of the current U.S. economy
- U.S. economic conditions over the next six months
- Business development spending expectations
- Open-ended question for comment
How may I access the MCI-EFI?
Survey results are posted on the Foundation website and included in the Foundation Forecast eNewsletter.