Equipment Lease Finance Index falls in June

Overall, confidence in the equipment finance market is 48.5, down from the May index of 59.2, reflecting growing concern over the European debt crisis, U.S. unemployment and regulatory and political uncertainty, according to the  June 2012 Monthly Confidence Index for the Equipment Finance Industry released on June 22 by The Equipment Leasing & Finance Foundation released.

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 $628 billion equipment finance sector.

When asked about the outlook for the future, MCI survey respondent Harry Kaplun, president, Frost Equipment Leasing and Finance, said, “Uncertainty is becoming more pronounced in the economy.  International economic problems, U.S. unemployment, and potential political changes all contribute to a hesitancy to make major capital expenditures.”

The overall MCI-EFIin June  is 48.5, down from the May index of 59.2.

Other results include:

  • When asked to assess their business conditions over the next four months, 8.1 percent of executives responding said they believe business conditions will improve over the next four months, down from 17.1 percent in May. 64.9 percent of respondents believe business conditions will remain the same over the next four months, down from 77.1 percent in May. 27 percent believe business conditions will worsen, up from 5.7 percent the previous month.
  • 8.1 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, a decrease from 20 percent in May. 64.9 percent believe demand will “remain the same” during the same four-month time period, down from 77.1 percent the previous month. 27 percent believe demand will decline, up from 2.9 percent in May.
  • 10.8 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, down from 25.7 percent in May. 86.5 percent of survey respondents indicate they expect the “same” access to capital to fund business, an increase from 74.3 percent the previous month. 2.7 percent survey respondents expect “less” access to capital, up from no one who expected less access in May.
  • When asked, 24.3 percent of the executives reported they expect to hire more employees over the next four months, down from 31.4 percent in May. 64.9 percent expect no change in headcount over the next four months, an increase from 62.9 percent last month, while 10.8 percent expect fewer employees, up from 5.7 percent in May.
  • 78.4 percent of the leadership evaluates the current U.S. economy as “fair,” down from 88.6 percent last month. 21.6 percent rate it as “poor,” up from 11.4 percent in May.
  • 8.1 percent of survey respondents believe that U.S. economic conditions will get “better” over the next six months, down from 22.9 percent in May. 64.9 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 65.7 percent in May. 27 percent believe economic conditions in the U.S. will worsen over the next six months, an increase from 11.4 percent who believed so last month.
  • In May, 29.7 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, down from 37.1 percent in May. 70.3 percent believe there will be “no change” in business development spending, up from 62.9 percent last month, and no one believes there will be a decrease in spending, unchanged from last month.

Depending on the market segment they represent, executives have differing points of view on the current and future outlook for the industry.

“The equipment leasing and finance industry is doing well.  However, the macroeconomic climate is unsettled which is muting our industry’s growth,” says Paul Menzel, president and CEO, Financial Pacific Leasing, LLC

“[We’re] concerned about what impact Europe’s problems and their banks may have on the U.S. economy,” says William H. Besgen, president and COO, Hitachi Capital America Corp.

“The future of the industry is good even with the changes on the horizon. The next few months will be challenging due to the political and global economic conditions,” according to Elaine Temple, president, Bancorpsouth Equipment Finance

“[It is] still to be determined. JP Morgan did us no favors. Europe [is] still choked with debt [which] will have a major impact on the U.S. The fast approaching budget/year end crisis for the U.S. will be last year all over again. Regardless of who is in the White House, the problem will not be dealt with,” says an source who which to remain anonymous.

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