Business Conditions Forecast: Steady Near Term, Some Concerns

The latest survey from key executives in the $628 billion equipment finance sector reports that many believe prevailing business conditions and expectations will remain steady over the next four months, but some have concerns.

The Equipment Leasing & Finance Foundation (the Foundation; Washington, DC) released its October 2012 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) that reports a qualitative assessment of both the prevailing business conditions and expectations for the future as forecasted by key executives from the $628 billion equipment finance sector.

Overall confidence in the equipment finance market is 53.3, relatively unchanged from the September index of 53.0, reflecting steady industry confidence despite economic, political and regulatory concerns.

When asked about the outlook for the future, MCI survey respondent Harry Kaplun, the president of Frost Equipment Leasing and Finance (San Antonio, TX), said, “Near term, results will continue to be strong.  In the longer term, significant variables like accounting rules, depreciation rates and cost of funds will change the landscape.” The overall MCI-EFI is 53.3, up from the September index of 53.0:

• When asked to assess their business conditions over the next four months, 8.6 percent of executives responding said they believe business conditions will improve over the next four months, relatively unchanged from 8.8 percent in September. 74.3 percent of respondents believe business conditions will remain the same over the next four months, up from 73.5 percent in September.  17.1 percent believe business conditions will worsen, down from 17.6 percent the previous month.

• 20 percent of survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, an increase from 11.8 percent in September.  57.1 percent believe demand will “remain the same” during the same four-month time period, down from 76.5 percent the previous month. 22.9 percent believe demand will decline, up from 11.8 percent in September.

• 20 percent of executives expect more access to capital to fund equipment acquisitions over the next four months, up from 14.7 percent in September. 80 percent of survey respondents indicate they expect the “same” access to capital to fund business, a decrease from 85.3 percent the previous month. No survey respondents expect “less” access to capital, unchanged from September.

• When asked, 34.3 percent of the executives reported they expect to hire more employees over the next four months, up from 29.4 percent in September.  57.1 percent expect no change in headcount over the next four months, down from 67.6 percent last month.  8.6 percent expect fewer employees, up from 2.9 percent of respondents who expected fewer employees in September.

• 65.7 percent of the leadership evaluates the current U.S.economy as “fair,” down from 76.5 percent last month.  34.3 percent rate it as “poor,” up from 23.5 percent in September.