The Equipment Leasing & Finance Foundation released the January 2020 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 $900 billion equipment finance sector. Overall, confidence in the equipment finance market rose for the third consecutive month to 59.9, an increase from the December index of 56.2.

When asked about the outlook for the future, MCI-EFI survey respondent David Normandin, CLFP, President and CEO, Wintrust Specialty Finance, said, “Demand for leasing in the segments we are involved in has remained strong with huge demand in Q4 2019. Credit quality has remained solid, and pull through has been good. Unemployment remains low and we see small business customers remaining optimistic.”

January 2020 Survey Results

The overall MCI-EFI is 59.9, an increase from 56.2 in December.  

• When asked to assess their business conditions over the next four months, 14.8 percent of executives responding said they believe business conditions will improve over the next four months, up from 10.3 percent in December. In addition, 81.5 percent of respondents believe business conditions will remain the same over the next four months, a decrease from 82.8 percent the previous month; 3.7 percent believe business conditions will worsen, down from 6.9 percent in December.
• 11.1 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 10 percent in December; 85.2 percent believe demand will “remain the same” during the same four-month time period, an increase from 76.7 percent the previous month; and 3.7 percent believe demand will decline, down from 13.3 percent in December.
• 11.1 percent of the respondents expect more access to capital to fund equipment acquisitions over the next four months, a decrease from 20 percent in December. Further, 85.2 percent of executives indicate they expect the “same” access to capital to fund business, an increase from 80 percent last month; 3.7 percent expect “less” access to capital, up from none the previous 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 December; 63 percent expect no change in headcount over the next four months, relatively unchanged from 63.3 percent last month; and 3.7 percent expect to hire fewer employees, down from 6.7 percent the previous month.
• 37 percent of the leadership evaluate the current U.S. economy as “excellent,” up from 23.3 percent the previous month; 63 percent of the leadership evaluate the current U.S. economy as “fair,” down from 76.7 percent in December. None evaluate it as “poor,” unchanged from last month.
• 13.3 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months; 80 percent indicate they believe the U.S. economy will “stay the same” over the next six months; and 6.7 percent believe economic conditions in the U.S. will worsen over the next six months, all unchanged from December.
• In January, 48.2 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 23.3 percent last month. In addition, 48.2 percent believe there will be “no change” in business development spending, a decrease from 73.3 percent in December; 3.7 percent believe there will be a decrease in spending, relatively unchanged from 3.3 percent last month.

January 2020 MCI-EFI Survey Comments from Industry Executive Leadership

Independent, Large Ticket
“A strong economy, low interest rates, full employment, and tax and regulatory reform give us optimism in the near term for the equipment finance industry.” — Dave Fate, President and CEO, Stonebriar Commercial Finance
 
Bank, Middle Ticket
“If the trade deal progresses as proclaimed, we may see some thawing in capital expenditures by farmers and agribusiness. Otherwise, the belt-tightening will remain.” — Michael Romanowski, President, Farm Credit Leasing