Business Conditions Forecast: Steady Near Term, Some Concerns

• 8.6 percent of survey respondents believe that U.S.economic conditions will get “better” over the next six months, up from 5.9 percent in September. 77.1 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, down from 79.4 percent in September. 14.3 percent believe economic conditions in the U.S. will worsen over the next six months, a decrease from 14.7 percent who believed so last month.

• In October, 37.1 percent of respondents indicate they believe their company will increase spending on business development activities during the next six months, up from 29.4 percent in September. 62.9 percent believe there will be “no change” in business development spending, down from 70.6 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:

“As an industry we are fine. However, the economy is limping along in a tortured recovery. We need our politicians to govern as a team and resolve some structural imbalances,” says Paul Menzel, the president and chief executive officer of Financial Pacific Leasing, LLC (Auburn, WA).

“The industry continues to fuel what growth is occurring in the marketplace. Strong availability of capital continues to compress margins while quality of submissions and portfolio remain strong. Our customers in the small ticket sector need more certainty in the economy before they begin to hire and invest in their business in any widespread fashion,” adds Valerie Hayes Jester, the president of Brandywine Capital Associates, Inc. (West Chester, PA).

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.

The respondents in this survey 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. 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 currentU.S.economy
6. U.S.economic conditions over the next six months
7. Business development spending expectations
8. Open-ended question for comment

The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that provides vision for the equipment leasing and finance industry through future-focused information and research. Primarily funded through donations, the Foundation is the only organization dedicated to future-oriented, in-depth, independent research for the leasing industry. www.LeaseFoundation.org