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.
The Equipment Leasing & Finance Foundation (the Foundation) releases the December 2016 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. 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 $1 trillion equipment finance sector. Overall, confidence in the equipment finance market is 67.5, a sharp increase from the November index of 54.6, with equipment finance executives expressing post-election optimism.
When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, managing director, Commercial Finance Group, Hanmi Bank, said, “I am optimistic as the election cycle is finally behind us, and regardless of the side, people will begin to accept it and move forward. I also think an interest rate increase will be healthy, and I believe that we will see that happen this coming year.”
December 2016 Survey Results:
The overall MCI-EFI is 67.5, an increase from the November index of 54.6.
• When asked to assess their business conditions over the next four months, 48.4 percent of executives responding said they believe business conditions will improve over the next four months, an increase from 13.8 percent in November. 45.2 percent of respondents believe business conditions will remain the same over the next four months, a decrease from 69 percent in November. 6.5 percent believe business conditions will worsen, a decrease from 17.2 percent the previous month.
• 38.7 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 13.8 percent in November. 54.8 percent believe demand will “remain the same” during the same four-month time period, down from 69 percent the previous month. 6.5 percent believe demand will decline, down from 17.2 percent who believed so in November.
• 22.6 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, an increase from 13.8 percent who expected more in November. 77.4 percent of executives indicate they expect the “same” access to capital to fund business, a decrease from 82.8 percent the previous month. None expect “less” access to capital, a decrease from 3.4 percent last month.
• When asked, 41.9 percent of the executives report they expect to hire more employees over the next four months, an increase from 34.5 percent in November. 48.4 percent expect no change in headcount over the next four months, a decrease from 55.2 percent last month. 9.7 percent expect to hire fewer employees, down from 10.3 percent in November.
• None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from last month. 100 percent of the leadership evaluate the current U.S. economy as “fair,” and none evaluate it as “poor,” both also unchanged from November.
• 71 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 17.2 percent in November. 25.8 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 65.5 percent the previous month. 3.2 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 17.2 percent who believed so last month.
• In December, 48.4 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 37.9 percent in November. 51.6 percent believe there will be “no change” in business development spending, a decrease from 58.6 percent the previous month. None believe there will be a decrease in spending, a decrease from 3.4 percent who believed so last month.
December 2016 MCI-EFI Survey Comments from Industry Executive Leadership:
Bank, Small Ticket
“The results of the election should lead to a more favorable business environment over time. The anticipation of this has already had a positive impact and is beginning to shift the mindsets of business leaders and investors. I am concerned about the potential negative impact the anticipated tax reform may have on our industry segment.” Robert Boyer, President, Susquehanna Commercial Finance, Inc.
Independent, Small Ticket
“I'm hopeful that we are moving into a more favorable business environment which will create a more optimistic outlook. Certainly having the election behind us is less of a distraction.” David T. Schaefer, CEO, Mintaka Financial, LLC
Bank, Middle Ticket
“A more business friendly administration will provide economic stimulus to all sectors of the economy.” Harry Kaplun, President, Specialty Finance, Frost Bank
Independent, Middle Ticket
“I believe that with the election now over there will be a more stable and hopefully a more positive business environment, which will translate to an increase in financing opportunities.” William H. Besgen, Senior Advisor, Vice Chairman Emeritus, Hitachi Capital America Corp.
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?
Survey results are posted on the Foundation website, http://www.leasefoundation.org/research/mci/ , included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.