The Equipment Leasing & Finance Foundation (the Foundation) has released the December 2022 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market is 45.9, an increase from the November index of 43.7.
When asked about the outlook for the future, MCI-EFI survey respondent Adam Warner, President, Key Equipment Finance, says: “’Cautious optimism’ is the theme as we move into 2023. The Federal Reserve is signaling that rate increases are slowing down; yet, this move doesn’t outweigh the softening demand for equipment financing due to rates being so high as a result. Businesses will need to continue moving forward regardless, and that means implementing new technology to increase productivity, efficiency and profitability.”
December 2022 Survey Results:
The overall MCI-EFI is 45.9, an increase from the November index of 43.7.
- When asked to assess their business conditions over the next four months, 3.7 percent of the executives responding said they believe business conditions will improve over the next four months, an increase from none in November. 55.6 percent believe business conditions will remain the same over the next four months, up from 46.4 percent the previous month. 40.7% believe business conditions will worsen, a decrease from 53.6 percent in November.
- 7.4 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 10.7 percent in November. 70.4 percent believe demand will “remain the same” during the same four-month time period, an increase from 67.9 percent the previous month. 22.2 percent believe demand will decline, up from 21.4 percent in November.
- 14.8 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 14.3 percent in November. 70.4 percent of executives indicate they expect the “same” access to capital to fund business, an increase from 64.3 percent last month. 14.8 percent expect “less” access to capital, down from 21.4 percent the previous month.
- When asked, 33.3 percent of the executives report they expect to hire more employees over the next four months, up from 32.1 percent in November. 51.9 percent expect no change in headcount over the next four months, a decrease from 64.3 percent last month. 14.8 percent expect to hire fewer employees, up from 3.6 percent in November.
- 3.7 percent of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month. 70.4 percent of the leadership evaluate the current U.S. economy as “fair,” down from 75 percent in November. 25.9 percent evaluate it as “poor,” an increase from 21.4 percent last month.
- None of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, unchanged from November. 48.2 percent indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 28.6 percent last month. 51.9 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 71.4 percent the previous month.
- In December 37 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 28.6 percent the previous month. 59.3 percent believe there will be “no change” in business development spending, down from 64.3 percent in November. 3.7 percent believe there will be a decrease in spending, a decrease from 7.1 percent last month.
December 2022 MCI-EFI Survey Comments from Industry Executive Leadership:
Captive, Small Ticket
“The pent-up demand is still very strong. We see this continuing through Q2 2023.” Jim DeFrank, EVP and Chief Operating Officer, Isuzu Finance of America, Inc
Independent, Small Ticket
“In this economy, cash is king and obtaining financing from traditional funding sources will only get more challenging.” James D. Jenks, CEO, Global Finance and Leasing Services, LLC
Bank, Middle Ticket
“We are at an interesting crossroads as economists predict a looming recession and the Fed continues to raise interest rates to tame the inflation beast. Customers are sharpening the pencil on major expansion opportunities to ensure timing is right for investment. We continue to find solutions to provide value to our customers and markets in this challenging environment.” Michael Romanowski, President, Farm Credit Leasing
ABOUT THE MCI
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, https://www.leasefoundation.org/industry-resources/monthly-confidence-index/, included in the Foundation Forecast eNewsletter, and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.