The Equipment Leasing & Finance Foundation (the Foundation) released the January 2012 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) Jan. 23. 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 59.0, an increase from the December index of 57.2, indicating improved optimism about business activity amid continuing concerns about the global economic situation.
When asked about the outlook for the future, survey respondent Elaine Temple, president, Bancorpsouth Equipment Finance, said it is good, but commented, “Customers are still replacing equipment out of necessity rather than growth. Until the European debt problems have a clearer resolution and the U.S. elections are decided, business is on the sidelines.”
January 2012 Survey Results:
The overall MCI-EFI is 59.0, an increase from the December index of 57.2.
• When asked to assess their business conditions over the next four months, 18.4 percent of executives responding said they believe business conditions will improve over the next four months, down from 22.2 percent in December. 76.3 percent of respondents believe business conditions will remain the same over the next four months, up from 75.7 percent in December. 5.3 percent of executives believe business conditions will worsen, an increase from 2.8 percent in December.
• 18.4 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 19.4 percent in December. 76.3 percent believe demand will “remain the same” during the same four-month time period, down from 80.6 percent the previous month. 5.3 percent believe demand will decline, up from none who believed so in December.
• 21.1 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 22.2 percent in December. 78.9 percent of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 75.0 percent the previous month. No survey respondents expect “less” access to capital, down from 2.8 percent in December.
• When asked, 31.62 percent of the executives reported they expect to hire more employees over the next four months, up from 22.2 percent in December. 63.2 percent expect no change in headcount over the next four months, a decrease from 69.4 percent last month, while 5.3 percent expect fewer employees, down from 8.3 percent in December.
• 89.5 percent of the leadership evaluates the current U.S. economy as “fair,” an improvement from 75.0 percent last month. 10.5 percent rate it as “poor,” also improved from 25.0 percent in December.
• 21.1 percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 19.4 percent in December. 78.9 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up slightly from 77.8 percent in December. No one responded that they believe economic conditions in the U.S. will worsen over the next six months, a decrease from 2.8 percent who believed so last month.
• In January, 34.2 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 22.2 percent in December. 65.8 percent believe there will be “no change” in business development spending, down from 77.8 percent last month, and no one believes there will be a decrease in spending, unchanged from 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
For more information, visit www.leasefoundation.org/IndRsrcs/MCI.
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