The Equipment Leasing & Finance Foundation released the July 2019 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Overall, confidence in the equipment finance market was 57.9, an increase from the June index of 52.8.

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.

When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, CLFP, President and CEO, Wintrust Specialty Finance, said, “The metrics remain solid for the U.S. economy and specifically small business lending. Our application volume continues to grow and conversion rates are strong. The inherent risk in the portfolio continues to be good and performance continues as it has been, with extremely low defaults. My concerns continue to be overly aggressive credit quality and pricing in the overall market. These historically are the indicators of challenges to come, and therefore we remain focused on these metrics in our business.”

July 2019 Survey Results

The overall MCI-EFI is 57.9, an increase from 52.8 in June.  

• When asked to assess their business conditions over the next four months, 10 percent of executives responding said they believe business conditions will improve over the next four months, up from 3.3 percent in June; 83.3 percent of respondents believe business conditions will remain the same over the next four months, an increase from 80 percent the previous month; and 6.7 percent believe business conditions will worsen, a decrease from 16.7 percent in June.
• 10 percent of the survey respondents believe demand for leases and loans to fund capital expenditures (CAPEX) will increase over the next four months, an increase from none who believed so in June. In addition, 86.7 percent believe demand will “remain the same” during the same four-month time period, an increase from 83.3 percent the previous month; 3.3 percent believe demand will decline, down from 16.7 percent who believed so in June.
• 10 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 13.3 percent in June; 90 percent of executives indicate they expect the “same” access to capital to fund business, an increase from 86.7 percent last month. None expect “less” access to capital, unchanged from last month.
• When asked, 33.3 percent of the executives report they expect to hire more employees over the next four months, an increase from 30 percent in June; 63.3 percent expect no change in headcount over the next four months, unchanged from last month; 3.3 percent expect to hire fewer employees, down from 6.7 percent last month.
• 41.4 percent of the leadership evaluate the current U.S. economy as “excellent,” up from 40 percent in June; 58.6 percent of the leadership evaluate the current U.S. economy as “fair,” an increase from 56.7 percent the previous month. None evaluate it as “poor,” down from 3.3 percent in June.
• 6.7 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, up from 3.3 percent in June. Eighty percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 70 percent the previous month; 13.3 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 26.7 percent in June.
• In July, 30 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 26.7 percent last month. Further, 70 percent believe there will be “no change” in business development spending, a decrease from 73.3 percent in June. None believe there will be a decrease in spending, unchanged from last month.

July 2019 MCI-EFI Survey Comments from Industry Executive Leadership

Independent, Small Ticket
“I'm optimistic because low unemployment should be leading to increased wages and consumer spending, which should continue to drive the economy. I’m concerned about delayed impacts of trade wars negatively affecting product prices and stanching demand for capital and consumer goods.”  — Quentin Cote, CLFP, President, Mintaka Financial, LLC

“Demand is stable but the types of transactions we are seeing are not for business expansions; they are more replacement equipment deals. The mood I sense is a concern that the economy may be at its peak and a decline may commence in the second half of this year. This type of sentiment usually means a weakening in demand for finance.” — Valerie Hayes Jester, President, Brandywine Capital Associates 

Bank, Middle Ticket
“Our customers continue to be challenged by low commodity prices and uncertainty over tariffs. This is impacting decisions regarding large capital investments, which is muting our growth opportunities.” — Michael Romanowski, President, Farm Credit Leasing

“Easing of trade tensions with Mexico and China should continue to boost confidence.” — Adam Warner, President, Key Equipment Finance