Washington DC, November 20, 2014 – The Equipment Leasing & Finance Foundation (the Foundation) releases the November 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. 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 $903 billion equipment finance sector. Overall, confidence in the equipment finance market is 64.2, an increase from the October index of 60.4 and the highest level since May.
When asked about the outlook for the future, MCI-EFI survey respondent Valerie Hayes Jester, President, Brandywine Capital Associates, Inc., said, “The mid-term elections are now over and consumer confidence seems to be improving as gas prices and unemployment statistics continue to decrease. We have experienced an increase in demand for capital equipment purchases and, more importantly, financing for those orders. Another important note is that the equipment being requisitioned appears to be associated with business expansion and not just replacement of older assets.”
November 2014 Survey Results:
The overall MCI-EFI is 64.2, an increase from the October index of 60.4.
- When asked to assess their business conditions over the next four months, 27.3% of executives responding said they believe business conditions will improve over the next four months, up from 23% in October. 69.7% of respondents believe business conditions will remain the same over the next four months, down from 74% in October. 3% believe business conditions will worsen, unchanged from the previous month.
- 30.3% of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 25.7% in October. 66.7% believe demand will “remain the same” during the same four-month time period, down from 71.4% the previous month. 3% believe demand will decline, unchanged from October.
- 21.2% of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 11.4% in October. 78.8% of survey respondents indicate they expect the “same” access to capital to fund business, down from 88.6% in October. None expect “less” access to capital, unchanged from the previous month.
- When asked, 45.4% of the executives reported they expect to hire more employees over the next four months, an increase from 40% in October. 48.5% expect no change in headcount over the next four months, unchanged from last month. 6.1% expect fewer employees, down from 11.4% in October.
- 3% of the leadership evaluate the current U.S. economy as “excellent,” unchanged from last month. 97% of the leadership evaluate the current U.S. economy as “fair,” up from 94.3% in October. None rate it as “poor,” down from 3% the previous month. .
- 42.4% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 28.6% who believed so in October. 54.6% of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 68.6% in October. 3% believe economic conditions in the U.S. will worsen over the next six months, unchanged from last month.
- In November, 42.4% of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 34.3% in October. 54.6% believe there will be “no change” in business development spending, a decrease from 63% last month. 3% believe there will be a decrease in spending, unchanged from last month.
November 2014 MCI-EFI Survey Comments from Industry Executive Leadership:
Independent, Small Ticket
“Volume of new applications has been steady for the past six months. Approval rates have been climbing slightly and fundings have remained good despite the lackluster application growth. We are hopeful that 2015 will see growth again as the federal government gets back to being more functional.” David Schaefer, CEO, Mintaka Financial, LLC
Independent, Middle Ticket
“We expect a slightly higher level of demand and see sources much more aggressive as year-end nears. We’re concerned about margins since banks have become more active.” George Booth, Managing Director, Black Rock Capital, LLC
Bank, Middle Ticket
“Overall, we expect capital expenditures for the industries we serve to be mixed next year with some sectors taking a pause and others continuing to expand. We are projecting growth in 2015 but not at the same growth rates that we have seen over the past couple of years.” Mike Romanowski, President, CoBank Farm Credit Leasing
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:
1. Current business conditions
2. Expected product demand over the next four months
3. Access to capital over the next four months
4. Future employment conditions
5. Evaluation of the current U.S. economy
6. U.S. economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment
How may I access the MCI-EFI?
Survey results are posted on the Foundation website, http://www.leasefoundation.org/research/mci/, 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.
Equipment Leasing and Finance Association’s Survey of Economic Activity: Monthly Leasing and Finance Index
October New Business Volume Up 9 Percent Year-over-year, Down 12 Percent Month-to-month, Up 8 Percent Year-to-date
Washington, DC, November 24, 2014- The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $903 billion equipment finance sector, showed their overall new business volume for October was $8.3 billion, up 9 percent from new business volume in October 2013. Month over month, new business volume was down 12 percent from September. Year to date, cumulative new business volume increased 8 percent compared to 2013.
Receivables over 30 days increased from the previous month to 1.2 percent, and were up from 0.9 percent in the same period in 2013. Charge-offs were unchanged for the seventh consecutive month at an all-time low of 0.2 percent.
Credit approvals totaled 78.3 percent in October, a decrease from 79.7 percent the previous month. Total headcount for equipment finance companies was up 0.7 percent year over year.
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) for November is 64.2, an increase from the October index of 60.4 and the highest level since May.
ELFA President and CEO William G. Sutton, CAE, said: “ELFA members report strong growth in new business volume, albeit tempered by continued margin compression in many sectors. The U.S. economy continues to expand at a modest rate, providing a welcome stimulus for investment in business equipment. Portfolios are performing relatively well, although delinquencies are showing some slight volatility. Most economic indicators-lower fuel prices, reduced unemployment and a robust equity and bond market-all point to a strong fourth quarter, absent some unforeseen development.”
Michael Doyle, President, BTMU Capital Leasing and Finance, Inc., said, “The solid growth in October year-on-year new business volume is evidence of a fairly robust capital expenditure environment. We see this trend continuing into a strong fourth quarter, with the possible exception of those markets related directly to petroleum exploration and development. These markets will continue to be negatively affected if low oil prices persist. Stronger sectors include those involving transportation assets and information technology equipment and software. Generally, we are seeing consistent credit discipline, but this has not yet translated into a more stable pricing environment. We expect that margin compression will continue to be an issue in the fourth quarter as lessors look to book volume to meet their 2014 budgets.”
About the ELFA’s MLFI-25
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. The MLFI-25 is released globally at 8 a.m. Eastern time from Washington, D.C., each month on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.
The MLFI-25 is a time series that reflects two years of business activity for the 25 companies currently participating in the survey. The latest MLFI-25, including methodology and participants is available below and also at http://www.elfaonline.org/Research/MLFI/
MLFI-25 Methodology
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved vs. submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
