The Foundation Releases MCI-EFI Regarding Business Conditions and Expectations

The Equipment Leasing & Finance Foundation (the Foundation) released the February 2015 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of 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 66.3, a slight increase from the three-year high level reached by the January index of 66.1.

When asked about the outlook for the future, MCI-EFI survey respondent William Verhelle, chief executive officer, First American Equipment Finance, a City National Bank company, says, “The economy continues to improve. First American is seeing increased equipment acquisition activity among the large corporate borrowers we serve. We are optimistic that lower energy costs, if they remain at current low levels, will drive increased U.S. economic activity in the second half of 2015. We are more optimistic about the U.S. economy today than we have been at any time during the past six years.”

February 2015 Survey Results:
The overall MCI-EFI is 66.3, a slight increase from the January index of 66.1.

  • When asked to assess their business conditions over the next four months, 30.3 percent of executives responding said they believe business conditions will improve over the next four months, up from 23.3 percent in January. 63.6 percent of respondents believe business conditions will remain the same over the next four months, down from 76.7 percent in January. 6.1 percent believe business conditions will worsen, up from none who believed so the previous month.
  • 42.4 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 20 percent in January. 51.5 percent believe demand will “remain the same” during the same four-month time period, down from 80 percent the previous month. 6.1 percent believe demand will decline, up from none in January.
  • 27.3 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3 percent in January. 72.7 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 66.7 percent in January. None expect “less” access to capital, unchanged from the previous month.
  • When asked, 39.4 percent of the executives reported they expect to hire more employees over the next four months, a decrease from 50 percent in January. 57.6 percent expect no change in headcount over the next four months, up from 50 percent last month. 3 percent expect to hire fewer employees, up from none who expected fewer in January.
  • 6.1 percent of the leadership evaluate the current U.S. economy as “excellent,” up from 3 percent last month. 90.9 percent of the leadership evaluate the current U.S. economy as “fair,” down from 97 percent in January. 3 percent rate it as “poor,” up from none the previous month.
  • 45.4 percent of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 43.3 percent who believed so in January. 54.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 56.7 percent in January. None believe economic conditions in the U.S. will worsen over the next six months, unchanged from last month.
  • In February, 48.5 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 50 percent in January. 51.5 percent believe there will be “no change” in business development spending, an increase from 50 percent last month. None believe there will be a decrease in spending, unchanged from last month.

February 2015 MCI-EFI survey comments from industry executive leadership:

  • Independent, Small Ticket
    “Demand remains moderate and competition is strong. We remain bullish for 2015 as we expand channels and products. We are planning on muted GDP so we are focused on making our own opportunities versus waiting for the general economy to expand.” David Schaefer, CEO, Mintaka Financial LLC

  • Bank, Small Ticket
    “Things just seem to be better. Gas prices and unemployment are headed in the right direction. I am concerned about the negative effect of lower gas prices, such as, higher fail rates of energy loans and energy stock value.” Kenneth Collins, CEO, Susquehanna Commercial Finance Inc.

  • Bank, Middle Ticket
    “I see continued strength in the transportation segment of the economy. That segment of our business will remain strong. The opportunities in oil and gas have substantially declined. I expect the decline to depress the volume of business during 2015. 2015 will be a mixed year with some industries doing well and others in decline.” Elaine Temple, president, BancorpSouth Equipment Finance

  • Bank, Middle Ticket
    “All signs have been pointing to a ‘break-out’ year in 2015. However, investment in capital assets continues to be sporadic. Companies continue to be cautious in expanding their production capacity. Let’s hope the economists are correct in their predictions for 2015.” Thomas Jaschik, president, BB&T Equipment Finance

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. Because 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 during the next four months
  • 3. Access to capital during the next four months
  • 4. Future employment conditions
  • 5. Evaluation of the current U.S. economy
  • 6. U.S. economic conditions during the next six months
  • 7. Business development spending expectations
  • 8. Open-ended question for comments

How may I access the MCI-EFI?
Survey results are posted on the Foundation website, 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 Finance Market Achieves Highest Index in Two Years

The Equipment Leasing & Finance Foundation has released the March 2014 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). Designed to collect leadership data, the index reports a qualitative assessment of the prevailing business conditions and expectations for the future as reported by key executives from the $827 billion equipment finance sector. Overall, confidence in the equipment finance market is 65.1, the highest index in two years and an increase from the February index of 63.3. The first quarter MCI levels are the three highest since April 2011.

When asked about the outlook for the future, MCI survey respondent Daryn Lecy, vice president of Operations, Stearns Bank N.A. Equipment Finance Division, says: “Considering we are coming off what are typically slower months and the likelihood that our extra-aggressive winter further impacted new business, we remain optimistic for 2014. We are fortunate to be experiencing year-over-year growth, increasing demand, and overall solid delinquency levels.”

March 2014 Survey Results
The overall MCI-EFI is 65.1, an increase from the February index of 63.3.

    When asked to assess their business conditions over the next four months, 31.4 percent of executives responding said they believe business conditions will improve over the next four months, up from 21.2 percent in February. Sixty-five point seven percent of respondents believe business conditions will remain the same over the next four months, down from 72.7 percent in February. And 2.9 percent believe business conditions will worsen, down from 6.1 percent who believed so the previous month.

    Just more than 31 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from 24.2 percent in February. And 62.9 percent believe demand will “remain the same” during the same four-month time period, down from 69.7 percent the previous month. Another 5.7 percent believe demand will decline, down from 6.1 percent who believed so in February.

    Thirty-one point four percent of executives expect more access to capital to fund equipment acquisitions over the next four months, unchanged from February. And 68.6 percent of survey respondents indicate they expect the “same” access to capital to fund business, up from 65.5 percent in February. No one expects “less” access to capital, down from 3.1 percent who expected less access the previous month.

    When asked, 40 percent of the executives reported they expect to hire more employees over the next four months, relatively unchanged from February. The other 60 percent expect no change in headcount over the next four months, up from 53 percent last month. No one expects fewer employees, down from 6.3 percent who expected fewer employees in February.

    Five point seven percent of the leadership evaluates the current U.S. economy as “excellent,” up from 3 percent last month. While 88.6 percent of the leadership evaluates the current U.S. economy as “fair,” down from 93.8 percent last month. And 5.7 percent rate it as “poor,” up from 3 percent last month.

    When asked, 31.4 percent of the of survey respondents believe that U.S. economic conditions will get “better” over the next six months, a decrease from 34.4 percent who believed so in February. And 68.6 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 59.4 percent in February. No one believes economic conditions in the U.S. will worsen over the next six months, a decrease from 6.2 percent last month.

    In March, 45.7 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, a decrease from 56.3 percent in February. Another 54.3 percent believe there will be “no change” in business development spending, an increase from 43.8 percent last month. No one believes there will be a decrease in spending, unchanged from last month.

March 2014 MCI Survey Comments from Industry Executive Leadership

Bank, Small Ticket
“We continue to see strong growth in both applications and origination volume. We are optimistic that this trend will continue as we close out the first quarter. In addition, portfolio performance in terms of delinquencies remains very low.” David Schaefer, CEO, Mintaka Financial, LLC

Independent, Middle Ticket
“New business volume targets in our truck transportation business continue to be met or exceeded by our over 2,300 dealers nationwide in the U.S., suggesting continued strength in the economy.” William Besgen, President & COO, Hitachi Capital America Corp.

Bank, Middle Ticket
“The overall economy is fair; however, I do see an increase in capital expenditures in 2014. The capital expenditures will be made to reduce labor cost and/or replace outdated or worn out equipment.” Elaine Temple, President, Bancorpsouth Equipment Finance

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, 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.