The Equipment Leasing and Finance Association's (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $521 billion equipment finance sector, showed overall new business volume for July was $5.7 billion, up 2 percent from volume of $5.6 billion in the same period in 2010.
But compared with June volume of $7.3 billion, July volume decreased by 22 percent. Year-to-date, new business volume is up 24 percent over last year. However, the percentage of responding companies that experienced a drop in volume from the year earlier period rose to 36 percent.
Credit quality is mixed. Receivables over 30 days increased 8 percent to 2.7 percent in July from 2.5 percent in June, but declined by 21 percent compared to the same period in 2010. Charge-offs decreased 37 percent in July from the previous month, and decreased by 50 percent from the same period in 2010.
Credit standards tightened in July as the number of lease applications approved decreased to 76.3 percent from 78.7 percent the previous month. Fifty-nine percent of participating organizations reported submitting more transactions for approval during the month, a decrease from 63 percent in June.
Finally, total headcount for equipment finance companies in July showed no significant change month to month and year over year. Supplemental data show that the construction industry and small- and medium-sized enterprises led the underperforming sectors.
Separately, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI) for August is 50.0, down 11 percent from the July index of 56.2, indicating apparent industry reaction to U.S. economic conditions and federal government fiscal management and policies. For more detailed information on the MCI-EFI visit www.LeaseFoundation.org.
ELFA President and CEO William Sutton, CAE, says, "Compared to a year ago, the equipment leasing and finance industry continues to show improvement. However, the sluggish U.S. economic recovery appears to be responsible, in part, for an uneven demand dynamic for investment in capital equipment."
Anthony Cracchiolo, president/CEO, Vendor Services, U.S. Bancorp Equipment Finance, located in Portland, OR, says, "Our overall business volume continues to improve with solid double-digit growth demonstrated through the first and second quarter, as compared to the same period in 2010. In July, while we continued to show growth, we also began to see a softening in demand. How this plays out throughout the remainder of the year is unclear, but we are hopeful that momentum will build in the fourth quarter."
About the ELFA's MLFI-25
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 9 a.m. Eastern time from Washington, D.C., each month, on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
The MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants is available below and also at www.elfaonline.org/ind/research/MLFI/
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved versus submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
ELFA MLFI-25 participants:
BancorpSouth Equipment Finance
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services
De Lage Landen Financial Services
Dell Financial Services
EverBank Commercial Finance
Fifth Third Bank
First American Equipment Finance
Hitachi Credit America
HP Financial Services
John Deere Financial
Key Equipment Finance
M&I Equipment Finance
PNC Equipment Finance
RBS Asset Finance
Siemens Financial Services
Susquehanna Commercial Finance
U.S. Bancorp Equipment Finance
Volvo Financial Services
Wells Fargo Equipment Finance