Equipment finance sector confidence dips

Confidence about prospects for the equipment finance sector for the last quarter of the year amongst industry leaders has slumped according to the latest data from the Equipment Leasing and Finance Foundation (ELFF), with its regular monthly confidence index posting a marked downturn.

The October score for the Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) shows confidence overall in prevailing business conditions and expectations for the future stands at 58.7, easing from the September index of 61.1, following a sharp rise in the August index.

MCI-EFI survey respondent Valerie Hayes Jester, president, Brandywine Capital Associates, said: “Demand is consistent but not what we would have expected coming into the fourth quarter. We see many of our small business customers delaying purchases or putting the equipment acquisition decision through more evaluation than we had seen in the last year. Margins are still under pressure given the amount of liquidity in the market. Portfolio performance continues to be strong.”

Deterioration in business conditions

The survey results show that fewer executives now expect business conditions will improve over the next four months, down from 22.2% in September to 14.8% currently. More than three quarters (77.8%) expect business conditions will remain the same over the period, an increase from 70.4% in September, but the number who think business conditions will worsen is unchanged at 7.4%.

Lower levels of optimism about the general business climate have fed into predictions about future levels of activity. While 29.6% expected demand for leases and loans to fund capital expenditures to increase over the next four months in September’s survey, that has now dropped to 22.2%.

Most (70.4%) believe demand will “remain the same” during the same four-month time period, up from 59.3% the previous month. However, fewer executives think demand will fall, with 7.4% anticipating a decline, a decrease from 11.1% who believed so in September.

US economy worries

The results suggest equipment finance executives are nervous about the performance of the US economy as a whole. Double the number now rate the economy as “poor,” with 7.4% reporting this, an increase from 3.7% the previous month.

There has also been a sharp drop in the numbers of survey respondents who believe that US economic conditions will get “better” over the next six months, which now stands at 7.4%, a decrease from 18.5% who believed so in September. In addition, 14.8% believe economic conditions in the US will worsen over the next six months, an increase from 7.4% who believed so last month.

“While we have been optimistic about an improving economy, we have seen some recent signs of a potential slowdown, primarily in our transportation/truck business sales and credit applications. This business tends to lead the economy and so we are uncertain if this is an early sign of a potential slowdown in the US economy,” commented William Besgen, president & COO, Hitachi Capital America.