Equipment industry data shows confidence slip

November’s upcoming election is having an impact on customer investment decisions, according to the Equipment Leasing and Finance Foundation’s rating of business confidence in the sector, which has dipped since August.

The Foundation’s monthly confidence index for the equipment finance industry (MCI-EFI) currently stands at 53.8, a one point decrease from the previous month’s index of 54.8.

MCI-EFI survey respondent Thomas Jaschik, president, BB&T Equipment Finance, said: “It appears US companies have put their plans for growth on hold pending the outcome of the presidential election. Capital investment levels continue at diminished levels. As such, the equipment finance industry will experience a reduction in new business volumes as compared to the last several years.”

When asked to assess their business conditions over the next four months, 18.8% of the equipment finance executives polled said they believe business conditions will improve over the next four months, an increase from 10% in August, while 62.5% of respondents believe business conditions will remain the same over the next four months, a decrease from 80% in August. Getting on for one in five (18.8%) believe business conditions will worsen, an increase from 10% the previous month.

Looking ahead, 28.1% 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% in August. Half (53.1%) believe demand will “remain the same” during the same four-month time period, down from 70% the previous month, and there has been a slight uptick in the proportion (18.8%) who believe demand will decline, up from 16.7% who believed so in August.

None of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 13.3% in August, while nearly all (96.9%) of executives indicate they expect the “same” access to capital to fund business, an increase from 80.0% the previous month.

None of the leadership evaluate the current US economy as “excellent,” unchanged from last month. All (100%) of those polled evaluate the current US economy as “fair,” an increase from 90% last month.

Three quarters (75%) of survey respondents indicate they believe the US economy will “stay the same” over the next six months, a decrease from 96.7% the previous month. Almost one in five (18.8%) believe economic conditions in the US will worsen over the next six months, an increase from 3.3% who believed so last month. There has also been an increase in those who believe US economic conditions will get “better” over the next six months, up at 6.3% from none in August.

“My concerns in the near term are for inconsistent demand levels in the small ticket marketplace caused mostly by anxiety about the presidential election, hostile world events, and a somewhat volatile stock market,” explained Valerie Hayes Jester, president, Brandywine Capital Associates. “We have seen many transactions placed ‘on hold” by small and midsize business owners due to lack of confidence.”

Assessing the big ticket market, Harry Kaplun, president, Specialty Finance, Frost Bank, said: “In general the industry is motoring along at a steady pace. Industries needing capital for expansion are few and most users of equipment financing are purchasing for replacement or efficiency reasons. Economic and political uncertainties are factors that will take months to understand, thus continuing to suppress capital spending.”