The Equipment Leasing & Finance Foundation (the Foundation) released the July 2012 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 $628 billion equipment finance sector. Overall, confidence in the equipment finance market is 51.5, up from the June index of 48.5, and reflects continuing concern over external economic factors and regulatory and political uncertainty.
When asked about the outlook for the future, MCI survey respondent Russell D. Nelson, president, Farm Credit Leasing Services Corporation, said, “Continued volatility/uncertainty at home and abroad may inhibit planned/needed capital expenditures during the next six months, but low interest rates and tax incentives will enable our industry to generate modest increases in asset volume and profitability through the remainder of 2012. Improving credit quality, stable earnings, and demand for innovative/creative lease and loan products should position our industry for improved growth in 2013 and beyond.”
July 2012 Survey Results:
The overall MCI-EFI is 51.5, up from the June index of 48.5.
When asked to assess their business conditions over the next four months:
• 6.5 percent of executives responding said they believe business conditions will improve over the next four months, down from 8.1 percent in June. 71 percent of respondents believe business conditions will remain the same over the next four months, up from 64.9 percent in June. 22.6 percent believe business conditions will worsen, down from 27 percent the previous month.
• 12.9 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 8.1 percent in June. 71 percent believe demand will “remain the same” during the same four-month time period, up from 64.9 percent the previous month. 16.1 percent believe demand will decline, down from 27 percent in June.
• 19.4 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 10.8 percent in June. 77.4 percent of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 86.5 percent the previous month. 3.2 percent survey respondents expect “less” access to capital, up from 2.7 percent who expected less access in June.
• When asked, 35.5 percent of the executives reported they expect to hire more employees over the next four months, up from 24.3 percent in June. 64.5 percent expect no change in headcount over the next four months, virtually unchanged from 64.9 percent last month, while no one expects fewer employees, down from 10.8 percent in June.
• 71 percent of the leadership evaluates the current U.S. economy as “fair,” down from 78.4 percent last month. 29 percent rate it as “poor,” up from 21.6 percent in June.
• 9.7 percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 8.1 percent in June. 71 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 64.9 percent in June. 19.4 percent believe economic conditions in the United States will worsen over the next six months, a decrease from 27 percent who believed so last month.
• In July, 25.8 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 29.7 percent in June. 71 percent believe there will be “no change” in business development spending, up slightly from 70.3 percent last month, and 3.2 percent believe there will be a decrease in spending, up from no one who believed so last month.
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:
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 May I Access the MCI-EFI?
For more information, visit www.leasefoundation.org/IndRsrcs/MCI.
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