The Equipment Leasing & Finance Foundation has released the September 2011 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 $521 billion equipment finance sector. Overall, confidence in the equipment finance market is 47.6, down from the August index of 50.0, indicating continuing concern with global economic conditions and their impact on the industry.
When asked about the outlook for the future, survey respondent David Schaefer, president, Orion First Financial, LLC, said, "Near-term prospects for organic origination growth will be less than desired. To significantly increase volume, companies will need to focus on increased market share and/or develop new products and channels. We need to make our own opportunities and not wait for the economy to get back to ‘normal.'"
September 2011 survey results
The overall MCI-EFI is 47.6, a decrease from the August index of 50.0.
• When asked to assess their business conditions over the next four months, 4.9 percent of executives responding said they believe business conditions will improve over the next four months, down from 13.2 percent in August. 61.0 percent of respondents believe business conditions will remain the same over the next four months, a decrease from 65.8 percent in August. 34.1 percent of executives believe business conditions will worsen, an increase from 21.1 percent in August.
• 12.2 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 21.1 percent in August. 68.3 percent believe demand will "remain the same" during the same four-month time period, an increase from 57.9 percent the previous month. 19.5 percent believe demand will decline, down from 21.1 percent who believed so in August.
• 15.0 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 21.1 percent in August. 82.5 percent of survey respondents indicate they expect the "same" access to capital to fund business, an increase from 73.7 percent the previous month. 2.5 percent of survey respondents expect "less" access to capital, a decrease from 5.3 percent who expected less access to capital in August.
• When asked, 17.5 percent of the executives reported they expect to hire more employees over the next four months, down from 23.7 percent in August. 72.5 percent expect no change in headcount over the next four months, an increase from 65.8 percent last month, while 10.0 percent expect fewer employees, a slight decrease from 10.5 percent in August.
• 55 percent of the leadership evaluates the current U.S. economy as "fair," unchanged from last month. 45 percent rate it as "poor," also relatively unchanged from August.
• 2.5 percent of survey respondents believe that U.S. economic conditions will get "better" over the next six months, down from 5.3 percent in August. 75 percent of survey respondents indicate they believe the U.S. economy will "stay the same" over the next six months, up from 63.2 percent in August. 22.5 percent responded that they believe economic conditions in the U.S. will worsen over the next six months, down from 31.6 percent who believed so last month.
• In September, 30 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 28.9 percent in August. 70 percent believe there will be "no change" in business development spending, up from 68.4 percent last month, and no one believes there will be a decrease in spending, down from 2.6 percent who believed so last month.
September survey comments
Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.
Bank, Large Ticket
"This industry is not the issue; the uncertainty and inconsistency in the global economy are the concerns." Executive, Large Ticket, Bank
Independent, Middle Ticket
"We are starting to see more demand for equipment leases across various sectors. The transaction sizes are increasing with a strong push to get capital equipment in by year end. Rates are becoming very competitive for the high-end customers, but still a void exists for getting middle market credits funded." Aylin Cankardes, president, Rockwell Financial Group
Bank, Small Ticket
"Optimistic for the long term and very cautious in the short term. The conditions in Europe will continue to deteriorate causing a ‘short term' negative effect in the U.S. markets, which includes the leasing and finance industry." Kenneth Collins, chairman/CEO, Susquehanna Commercial Finance Inc.
Independent, Small Ticket
"The industry overall is faring well through these challenging times. In the small ticket sector we still see a lack of momentum and sluggish demand. The summer's stock market fluctuations, debt ceiling issues, and the recent hurricane will most likely keep demand on the low side for the foreseeable future. Confidence among many small business owners continues to erode." Valerie Hayes Jester, president, Brandywine Capital Associates 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 the MCI-EFI is 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 to access the MCI-EFI
Survey results, including respondent demographics, are posted on the Foundation website at www.leasefoundation.org/IndRsrcs/MCI/.