Confidence Falls in Equipment Finance

Source: ControlDesign.com

Sep 12, 2011

In apparent reaction to U.S. economic conditions and federal government fiscal management and policies, key executives from the $521 billion equipment finance sector are losing confidence in the equipment finance market. According to the latest data from the Equipment Leasing & Finance Foundation (www.leasefoundation.org), the Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) fell to 50.0 in August, down from the July index of 56.2. Nearly half of the survey respondents categorized the current U.S. economy as "poor," up from 28% last month.

The index is a qualitative assessment of both the prevailing business conditions and expectations for the future. One survey respondent looking to the future expressed optimism for the remainder of 2011, noting pent-up demand for replacement assets. But his optimism comes with a caveat: "The key to future business confidence rests with leadership in Washington, and their ability to craft a budget that Wall Street, Main Street and the global community view positively," he said.

But the number of executives who expected business conditions to improve over the next four months was little more than 13%, down from 14% in July. The majority (almost 66%) believe business conditions will remain the same over the next four months, a decrease from more than 81% in July. Some 21% expect business conditions to worsen, a sharp increase from less than 5% in July.

"Until such time that the federal government can remove the unpredictability related to taxes and fiscal policy, the economy will continue to sputter as the business community will be very cautious with respect to additional investment," said one executive. "This scenario will not bode well for the equipment finance industry."

Though the outlook on access to capital shows a similar distribution, executives are slightly more optimistic in this area, with more than 21% of executives expecting to have more access to capital to fund equipment acquisitions over the next four months. Nonetheless, that number is also down a couple percentage points from July. A little more than 5% of respondents expect less access to capital—the first time in nine months that any respondents said they expected less access.

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