Equipment Finance Industry Confidence Shows Signs of Improvement

Washington, DC, October 22, 2010 –- The Equipment Leasing & Finance Foundation (the Foundation) releases the October 2010 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 $521 billion equipment finance sector.   Overall, confidence in the equipment finance market is 58.8, an improvement from the September 2010 index of 56.9.

When asked about the outlook for the future, survey respondent Russell Nelson of Farm Credit Leasing, said, “Continued uncertainty and volatility in domestic and foreign markets, mixed economic data and forecasts, political impact of November elections, ongoing regulatory issues, and pending lease accounting changes will change the operating landscape and the number of players during the next 12 to 24 months.  Institutions with strong capital, diversified customer/industry base, operational discipline, and creative/talented/energetic workforce will be rewarded with significant increase in demand for financing of necessary asset growth and replacement of aging equipment.”

October  2010 Survey Results:

The overall MCI-EFI is 58.8, an improvement from the September index of 56.9.

§         When asked to assess if their current business conditions would remain the same over the next four months, 26.8% of executives responding said they believe business conditions will improve over the next four months, a slight decrease from 27.9% in September. 7.3% believe conditions will get worse (compared with 4.7% in September), and 65.9% believe business conditions will remain the same over the next four months.

• 34% of survey respondents, up from 32.6% in September, believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, while 61%, up from 55.8% in September, believe demand will “remain the same” during the same four-month time period, and 4.9%, a significant drop from 11.6% in September,  believe demand will decrease.

• 78% of survey respondents indicate they expect the “same” access to capital to fund business, a significant increase from 67.4% in September.  22% of executives expect more access to capital to fund equipment acquisitions over the next four months. 4.7% expect “less” access to capital.
• When asked, 22% of the executives reported they expect to hire more employees over the next four months, up from 20.9% in September, and 70.7% expect no change in headcount over the next four months, while 7.3% expect to lay off employees, up from  4.7% in September.

• 100% of the leadership still evaluate the current U.S. economy as “poor” or “fair.”  In September, 68% rated the economy as “fair” and 32% rated the economy as “poor”.

• 17% of survey respondents believe that U.S. economic conditions will get “better” over the next six months. 75.6% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 69.8% response in September. 7% believe economic conditions in the U.S. will worsen over the next six months.

• In October, 36.6% of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 27.9% in September.  63% believe there will be “no change” in business development spending.

October  2010 MCI Survey Comments from Industry Executive Leadership:

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

Bank, Large Ticket

“The leasing industry will continue to be challenged in the near future due to upcoming lease accounting changes, modest client demand and excess liquidity.” CEO, Large-ticket, bank owned company

Captive, Small Ticket

“Depending on the accounting and tax situation, I think the future of the industry is uncertain.” CEO, Small-ticket Captive

Bank, Middle Market

“[The Industry] remains challenged as businesses are carefully regarding their commitment to capex spending.”  Elaine Temple, BancorpSouth Equipment Finance

 

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/IndRsrcs/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.

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The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. Visit the Foundation online at http://www.leasefoundation.org/.