The Equipment Leasing & Finance Foundation (the Foundation) releases the January 2017 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 is 73.4, an increase from the December index of 67.5, and the highest index since the MCI was launched in May 2009 to track recovery after the 2008 downturn.
The outlook for U.S. companies has become much more positive since the presidential election. Lower taxes, less regulation and rising interest rates will be the catalyst to spur capital asset acquisitions. This will undoubtedly set the stage for robust equipment finance activity.
January 2017 Survey Results:
The overall MCI-EFI is 73.4, an increase from the December index of 67.5. Here are some of the important highlights of the study:
- When asked to assess their business conditions over the next four months, 74.2% of executives responding said they believe business conditions will improve over the next four months, an increase from 48.4% in December. 22.6% of respondents believe business conditions will remain the same over the next four months, a decrease from 45.2% in December. 3.2% believe business conditions will worsen, a decrease from 6.5% the previous month.
- 71.0% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 38.7% in December. 25.8% believe demand will “remain the same” during the same four-month time period, down from 54.8% the previous month. 3.2% believe demand will decline, down from 6.5% who believed so in December.
- 19.4% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 22.6% who expected more in December. 80.6% of executives indicate they expect the “same” access to capital to fund business, an increase from 77.4% the previous month. None expect “less” access to capital, unchanged from last month.
- When asked, 35.5% of the executives report they expect to hire more employees over the next four months, a decrease from 41.9% in December. 61.3% expect no change in headcount over the next four months, an increase from 48.4% last month. 3.2% expect to hire fewer employees, down from 9.7% in December.
- None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from last month. 100.0% of the leadership evaluate the current U.S. economy as “fair,” and none evaluate it as “poor,” both also unchanged from December.
- 61.3% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 71% in December. 38.7% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 25.8% the previous month. None believe economic conditions in the U.S. will worsen over the next six months, a decrease from 3.2% who believed so last month.
- In January, 58.1% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 48.4% in December. 41.9% believe there will be “no change” in business development spending, a decrease from 51.6% the previous month. None believe there will be a decrease in spending, unchanged from last month.
Why an MCI-EFI?
Confidence in the U.S. economy and the capital markets is a critical driver to the equipment finance industry. Throughout history, when confidence increases, consumers and businesses are more apt to acquire more consumer goods, equipment and durables, and invest at prevailing prices. When confidence decreases, spending and risk-taking tend to fall. Investors are said to be confident when the news about the future is good and stock prices are rising.
Who participates in the MCI-EFI?
The respondents are comprised of a wide cross section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The MCI-EFI uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence.
How is the MCI-EFI designed?
The survey consists of seven questions and an area for comments, asking the respondents’ opinions about the following:
- Current business conditions
- Expected product demand over the next four months
- Access to capital over the next four months
- Future employment conditions
- Evaluation of the current U.S. economy
- U.S. economic conditions over the next six months
- Business development spending expectations
- Open-ended question for comment
How may I access the MCI-EFI?
Survey results are posted on the Foundation website included in the Foundation Forecast newsletter and included in press releases. Survey respondent demographics and additional information about the MCI are also available at the link above.