Uncertainty hits US equipment finance confidence levels

When asked about the outlook for the future, survey respondent Paul Menzel, president and CEO, Financial Pacific Leasing, said: “Uncertainty is the theme in the economy for the balance of 2018. Between the administration’s trade strategy, the mid-term elections, and the President’s political challenges, decision-makers are taking a wait-and-see approach to business investment.”

When asked to assess their business conditions over the next four months, 13.3% of executives said they believe business conditions will improve, a decrease from 19.4% in July. The proportion of executives who predict that business conditions will worsen has doubled over the same period to 6.7%.

There has also been a drop in the number of executives expecting an increase in demand for leases and loans, with a fall to 16.7% from 19.4% in July, although the vast majority expect demand to stay the same.

In addition, three-quarters (73.3%) of survey respondents indicate they believe the US economy will “stay the same” over the next six months.

Michael Romanowski, president, Farm Credit Leasing Services Corporation, said: “Trade tariffs are having an impact on capital investment by customers. Some are continuing to move forward, others are delaying investment. Overall, we are seeing business activity slightly behind levels from a year ago.”

Despite the drop in confidence, the Equipment Leasing and Finance Association’s monthly leasing and finance index showed overall new business volume for July was $8.2 billion, up 4% compared to the same month last year.

Volume was down 10% month-to-month from $9.1 billion in June, but year-to-date cumulative new business volume was up 4% compared to 2017.

Ralph Petta, ELFA president and CEO, said: “End-of-summer volume remains steady in the face of slowly rising interest rates and trade and tariff concerns in some pockets of the economy. Fundamentals in the economy also remain steady, featuring solid second quarter growth, low unemployment, a gravity-defying equities market and continued optimism in much of the business community borne out of tax legislation enacted last year.

“As we enter the late summer months, industry observers will be keeping a close eye on changes in credit markets as well as a flattening of the yield curve in the broader bond market, either of which could have implications for the economy in general, and the equipment finance space in particular.”

There was a positive report on the equipment finance business outlook from Joe Hines, managing director – head of direct originations, SunTrust Equipment Finance and Leasing.

He said: “Over the past five months, SunTrust has seen new originations pick up across our lines of business, as companies broadly have adjusted for changes resulting from tax reform.

“Some companies have expressed concern regarding the impact trade tariffs may have. However, we remain optimistic as the outlook for capital expenditure plans over the next 12 months appears robust and new projects are coming online in our markets regularly.”