The Equipment Leasing & Finance Foundation (the Foundation) has released the May 2019 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). 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 improved in May to 59.2, up from the April index of 58.3.
This month marks the 10th anniversary of the MCI-EFI, which was launched in the wake of the 2008 recession to provide industry participants with more insight and context for industry statistics and performance.
When asked about the outlook for the future, MCI-EFI survey respondent Michael DiCecco, executive managing director, Huntington Asset Finance, says, “Our customers continue to be generally positive, delivering solid business performance and investing in equipment. Should that sentiment continue, I believe the equipment finance industry will have another good year.”
May 2019 Survey Results:
The overall MCI-EFI is 59.2, an increase from 58.3 in April.
• When asked to assess their business conditions over the next four months, 16.1 percent of executives responding said they believe business conditions will improve over the next four months, up from 13.3 percent in April. 67.7 percent of respondents believe business conditions will remain the same over the next four months, a decrease from 76.7 percent the previous month. 16.1 percent believe business conditions will worsen, an increase from 10 percent in April.
• 16.1 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 13.3 percent in April. 77.4 percent believe demand will remain the same during the same four-month time period, a decrease from 83.3 percent the previous month. 6.5 percent believe demand will decline, up from 3.3 percent who believed so in April.
• 12.9 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, up from 6.7 percent in April. 87.1 percent of executives indicate they expect the same access to capital to fund business, a decrease from 93.3 percent last month. None expect less access to capital, unchanged from last month.
• When asked, 41.9 percent of the executives report they expect to hire more employees over the next four months, a decrease from 46.7 percent in April. 45.2 percent expect no change in headcount over the next four months, an increase from 40 percent last month. 12.9 percent expect to hire fewer employees, down from 13.3 percent last month.
• 51.6 percent of the leadership evaluate the current U.S. economy as excellent, up from 40 percent in April. 48.4 percent of the leadership evaluate the current U.S. economy as fair, a decrease from 60 percent the previous month. None evaluate it as poor, unchanged from April.
• 9.7 percent of the survey respondents believe that U.S. economic conditions will get better over the next six months, up from 6.7 percent in April. 77.4 percent of survey respondents indicate they believe the U.S. economy will stay the same over the next six months, an increase from 73.3 percent the previous month. 12.9 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 20 percent in April.
• In May, 35.5 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 36.7 percent last month. 64.5 percent believe there will be “no change” in business development spending, an increase from 63.3 percent in April. None believe there will be a decrease in spending, unchanged from last month.
May 2019 MCI-EFI Survey Comments from Industry Executive Leadership:
Bank, Small Ticket
“The domestic economy continues to remain strong with most indicators at strong positions. Our volume has been strong, and confidence of our customers has remained positive. We are sensitive to industry portfolio performance and stress, and therefore, are cautiously optimistic about the remainder of 2019,” states David Normandin, CLFP, president and CEO, Wintrust Specialty Finance.
Independent, Small Ticket
“I’m optimistic about low unemployment levels and the pace of new car purchases. I am concerned that trade wars will create pockets of economic hardship, such as alternative energy and agriculture, and that the issues will spread to related industries,” says Quentin Cote, CLFP, president, Mintaka Financial LLC.
Bank, Middle Ticket
“We are beginning to see producers and agribusinesses make capital investments after years of belt-tightening. Activity has picked up but continues to be challenged by low commodity prices and uncertainty over trade tariffs,” says Michael Romanowski, president, Farm Credit Leasing Services Corp.
Industry Perspectives on the MCI-EFI
In commemorating the MCI-EFI’s 10-year milestone, equipment finance industry leaders shared their perspectives on how the index informs their decision making:
“The value proposition of the MCI is that it provides the story behind the numbers and gives the sentiment of our leaders and customers about the current and future business environment,” says Valerie Hayes Jester, president, Brandywine Capital Associates Inc. “It offers a unique and valuable insight into the mindset of the decision makers of the lending and borrowing points of view.”
Dave B. Fate, president and CEO, Stonebriar Commercial Finance, says, “The [MCI] data is very valuable and comes from a wide cross-section of our industry’s executives. The month-to-month data is a consistent barometer of the industry’s confidence and allows companies to manage and/or set expectations accordingly.”
“The MCI provides insights from a wide perspective of equipment leasing companies regarding the health of the industry, which is a barometer for the health of the overall U.S. economy,” says Michael Romanowski, president, CoBank Farm Credit Leasing. “It allows me to compare the industry perspective to what we are experiencing at Farm Credit Leasing.”