Equipment-Finance Confidence Rises to Highest Level in Two Years

Falling interest rates are injecting a boost of confidence into the equipment finance market. The Equipment Leasing & Finance Foundation’s Monthly Confidence Index hit a two-year high of 58.4, a 7.7-point increase over the July number of 50.7, and an 8-point increase compared to the same period last year.

The index serves as a snapshot of current business conditions and expectations for the future according to key executives from the $1 trillion equipment finance sector.  

ELFA member and president of Huntington Equipment Finance,  Jeff Elliott, is optimistic about the future, saying, “Our overall confidence in the near-term future of the industry is high. We’re expecting economic conditions for businesses to improve over the next six months as interest rates decline and investment in U.S. manufacturing continues to grow, which in turn will lead to rising demand for funding to complete capex projects.”

Donna Yanuzzi, EVP of 1st Equipment Finance, added, “Interest rates are expected to decrease shortly. Historically, when this happens, businesses tend to increase their capex spending. I believe there is pent-up demand in several sectors that are waiting for this interest rate reduction to happen. Interest rates typically impact transactional business, and equipment finance is one of those industries.”

This month’s findings included:

• Over the next four months, 37.5% of the executives believe business conditions will improve, up from 3.9% in July. About half (45.8%) believe business conditions will remain the same, down from 76.9% the previous month. Just 16.7% believe business conditions will worsen, down from 19.2% in July.
• Lease and loan demand expectations jumped to 41.7% in August, up from 11.7% in July. Another 37.5% believe demand will “remain the same” for the remainder of the year, down from 73.1% the previous month. Of the executives surveyed, 20.8% feel demand will decline, an increase from 15.4% in July.
• Executives generally expect about the same access to capital to fund equipment acquisitions over the next four months. Only 4.2% expect less access to capital, relatively unchanged from 3.9% in July.
• Job openings in the industry will remain relatively flat, with 70.8% of survey respondents expecting no change in headcount, 8.3% expecting to hire fewer employees and 20.8% expecting to hire more employees over the next four months.
• None of the leadership evaluated the current U.S. economy as “excellent,” unchanged from the previous month. The overwhelming majority of executives - 91.7%  - rated the economy as “fair,” up from 84.6% in July, and 8.3% called it “poor,” down from 15.4% last month.
• The number of survey respondents who believe U.S. economic conditions will improve over the next six months has improved to 37.5% from 19.2% who believed so in July. The percentage of survey respondents who believe the economy will stay the same decreased to 41.7% from 57.7% last month. Although 20.8% believe economic conditions will worsen, that number declined from 23.1% in July.
• In August, 33.3% of respondents said they believed their company would increase spending on business development activities during the next six months, a 19.2% increase from the previous month. The largest percentage - 62.5% - believe there will be “no change” in business development spending, and 4.2% believe there will be a decrease in spending.