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Equipment Lease Finance Industry Confidence Lower in June

Mon July 02, 2012 - National Edition
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Confidence in the equipment finance market in June, according to the latest study from the Equipment Leasing & Finance Foundation.
Confidence in the equipment finance market in June, according to the latest study from the Equipment Leasing & Finance Foundation.

The Equipment Leasing & Finance Foundation (the Foundation) releases the June 2012 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) June 22. 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 48.5, down from the May index of 59.2, reflecting growing concern over the European debt crisis, U.S. unemployment, and regulatory and political uncertainty.

When asked about the outlook for the future, MCI survey respondent Harry Kaplun, President, Frost Equipment Leasing and Finance, offered comments shared by others responding to the MCI survey, “Uncertainty is becoming more pronounced in the economy. International economic problems, U.S. unemployment, and potential political changes all contribute to a hesitancy to make major capital expenditures.”

June 2012 Survey Results

The overall MCI-EFI is 48.5, down from the May index of 59.2.

• When asked to assess their business conditions over the next four months, 8.1 percent of executives responding said they believe business conditions will improve over the next four months, down from 17.1 percent in May. 64.9 percent of respondents believe business conditions will remain the same over the next four months, down from 77.1 percent in May. 27 percent believe business conditions will worsen, up from 5.7 percent the previous month.

• 8.1 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 20 percent in May. 64.9 percent believe demand will “remain the same” during the same four-month time period, down from 77.1 percent the previous month. 27 percent believe demand will decline, up from 2.9 percent in May.

• 10.8 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 25.7 percent in May. 86.5 percent of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 74.3 percent the previous month. 2.7 percent survey respondents expect “less” access to capital, up from no one who expected less access in May.

• When asked, 24.3 percent of the executives reported they expect to hire more employees over the next four months, down from 31.4 percent in May. 64.9 percent expect no change in headcount over the next four months, an increase from 62.9 percent last month, while 10.8 percent expect fewer employees, up from 5.7 percent in May.

• 78.4 percent of the leadership evaluates the current U.S. economy as “fair,” down from 88.6 percent last month. 21.6 percent rate it as “poor,” up from 11.4 percent in May.

• 8.1 percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 22.9 percent in May. 64.9 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 65.7 percent in May. 27 percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 11.4 percent who believed so last month.

• In May, 29.7 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 37.1 percent in May. 70.3 percent believe there will be “no change” in business development spending, up from 62.9 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:

• Current business conditions

• Expected product demand over the next four months

• Access to capital over the next four months

• Future employment conditions

• Evaluation of the current U.S. economy

• U.S. economic conditions over the next six months

• Business development spending expectations

• Open-ended question for comment

For more information, visit www.LeaseFoundation.org.