The Equipment Leasing & Finance Foundation (the Foundation) releases the December 2015 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 $1.046 trillion equipment finance sector. Overall, confidence in the equipment finance market is 60.2, unchanged from the November index.
When asked about the outlook for the future, MCI-EFI survey respondent Valerie Hayes Jester, President, Brandywine Capital Associates, Inc., said, “December activity is strong as we traditionally experience a last minute push to acquire equipment from procrastinators. Looking a bit further out we still see uncertainty as events continue to unfold, gas prices decrease and the presidential election continues to baffle.”
December 2015 Survey Results
The overall MCI-EFI is 60.2, unchanged from the November index.
- When asked to assess their business conditions over the next four months, 12.5% of executives responding said they believe business conditions will improve over the next four months, a decrease from 14.8% in November. 75.0% of respondents believe business conditions will remain the same over the next four months, an increase from 74.1% in November. 12.5% believe business conditions will worsen, an increase from 11.1% the previous month.
- 8.3% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 22.2% in November. 79.2% believe demand will “remain the same” during the same four-month time period, up from 66.7% the previous month. 12.5% believe demand will decline, an increase from 11.1% who believed so in November.
- 25.0% of executives expect more access to capital to fund equipment acquisitions over the next four months, an increase from 22.2% in November. 70.8% of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 77.8% the previous month. 4.2% expect “less” access to capital, an increase from none last month.
- When asked, 45.8% of the executives report they expect to hire more employees over the next four months, a decrease from 48.1% in November. 50.0% expect no change in headcount over the next four months, up from 48.1% last month. 4.2% expect to hire fewer employees, up from 3.7% in November.
- 4.2% of the leadership evaluate the current U.S. economy as “excellent,” an increase from 3.7% last month. 95.8% of the leadership evaluate the current U.S. economy as “fair,” up from 92.6% in November. None rate it as “poor,” a decrease from 3.7% the previous month.
- 8.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 18.5% who believed so in November. 79.2% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 77.8% the previous month. 12.5% believe economic conditions in the U.S. will worsen over the next six months, an increase from 3.7% who believed so last month.
- In December, 50.0% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 44.4% in November. 45.8% believe there will be “no change” in business development spending, a decrease from 51.9% the previous month. 4.2% believe there will be a decrease in spending, an increase from 3.7% last month.
Survey Demographics
Market Segment:
- Bank: 75.0%
- Captive: 4.2%
- Financial Services: 4.2%
- Independent: 16.7%
- Other: 0.0%
Market Segments Based on Transaction Size of New Business Volume
- Large-Ticket (New Business Volume Avg. Transaction Size Over $5 Million): 12.5%
- Middle-Ticket (New Business Volume Avg. Transaction Size of $250,000 – $5 Million): 50.0%
- Small-Ticket (New Business Volume Avg. Transaction Size of $25,000 – $249,999): 37.5%
- Micro-Ticket (New Business Volume Avg. Transaction Less Than $25,000): 0.0%
Organization Size (Based on Annual New Business Volume for Fiscal Year 2010):
- Under $50 Million: 8.3%
- $50 Million – $250 Million: 12.5%
- $250 Million – $1 Billion: 33.3%
- Over $1 Billion: 45.8%
December 2015 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.
Independent, Small Ticket
“Application and funding volume continues to be steady. We are expecting little change in either direction. Delinquencies are still in the historical low range. Growing originations is still the biggest challenge with the economy growing so slowly.” David T. Schaefer, CEO, Mintaka Financial, LLC
Bank, Middle Ticket
“The manufacturing segment of the U.S. economy has slowed substantially over the last several months. This will have a direct impact on the equipment finance industry. I anticipate marginal growth, if any, for the first half of 2016.” Thomas Jaschik, President, BB&T Equipment Finance
“We continue to see a mixed agriculture economy with less investment in the cash grain sector and some protein sectors, while continued investment in other ag sectors. We expect flat growth in 2016 and a slight uptick in portfolio stress. We continue to provide value add solutions to customers looking to make capital investment.” Michael Romanowski, President, Farm Credit Leasing Services Corporation
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