The Equipment Leasing & Finance Foundation (the Foundation) has released the January 2019 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 $1 trillion equipment finance sector. Overall, confidence in the equipment finance market eased further in January to 53.4, a decrease from the December index of 55.5.
When asked about the outlook for the future, MCI-EFI survey respondent Thomas Jaschik, president, BB&T Equipment Finance, says, “I believe economic conditions in 2019 will be less favorable than 2018. As such, I expect the equipment finance industry to continue its growth, although at a lesser pace than the prior two years. Excess market liquidity will continue to adversely impact margins and will have a long-term impact on industry profitability. Creativity and efficiency will be key to future success.”
January 2019 Survey Results
The overall MCI-EFI is 53.4, a decrease from 55.5 in December.
- When asked to assess their business conditions over the next four months, 10 percent of executives responding said they believe business conditions will improve over the next four months, a decrease from 13.8 percent in December. 70 percent of respondents believe business conditions will remain the same over the next four months, an increase from 65.5 percent the previous month. 20 percent believe business conditions will worsen, down slightly from 20.7 percent who believed so the previous month.
- 3.3 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a slight decrease from 3.5 percent in December. 80 percent believe demand will remain the same during the same four-month time period, an increase from 79.3 percent the previous month. 16.7 percent believe demand will decline, down from 17.2 percent who believed so in December.
- 21.4 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 17.2 percent in December. 78.6 percent of executives indicate they expect the same access to capital to fund business, an increase from 75.9 percent last month. None expect less access to capital, down from 6.9 percent last month.
- When asked, 33.3 percent of the executives report they expect to hire more employees over the next four months, a decrease from 44.8 percent in December. 53.3 percent expect no change in headcount over the next four months, an increase from 44.8 percent last month. 13.3 percent expect to hire fewer employees, up from 10.3 percent last month.
- 36.7 percent of the leadership evaluate the current U.S. economy as excellent, a decrease from 41.4 percent in December. 63.3 percent of the leadership evaluate the current U.S. economy as fair, an increase from 58.6 percent last month. None evaluate it as poor, unchanged from last month.
- 10 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, down slightly from 10.7 percent in December. 50 percent of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, a decrease from 53.6 percent the previous month. 40 percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 35.7 percent in December.
- In January, 26.7 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 42.9 percent last month. 73.3 percent believe there will be no change in business development spending, an increase from 57.1 percent in December. None believe there will be a decrease in spending, unchanged from last month.
January 2019 MCI-EFI Survey Comments from Industry Executive Leadership:
- Bank, Small Ticket – “The industry has sufficient liquidity at relatively low cost. While there continues to be slack and uncertainty in business investment, fundamentals in the economy are still positive.” Paul Menzel, CLFP, President and CEO, Financial Pacific Leasing Inc., an Umpqua Bank Co.
- Independent, Small Ticket – “Businesses seem more cautious to continue expansion until the environment in Washington and the stock market becomes more stable. The government shutdown continues to emphasize the incredible polarization that exists in our government. This type of environment makes it difficult to consider investment in equipment.” Valerie Hayes Jester, president, Brandywine Capital Associates
- Bank, Middle Ticket – “Fundamentally business and the economy remain strong. Areas of concern in the future like foreign trade, interest rates, and government spending cast a cloud that brings caution to expansion plans.” Harry Kaplun, president, Specialty Finance, Frost Bank