Equipment Finance Industry Confidence Steady in December

Washington, DC – The Equipment Leasing & Finance Foundation (the Foundation) has released the December 2023 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI). The index reports a qualitative assessment of both the prevailing business conditions and expectations for the future as reported by key executives from the $1 trillion equipment finance sector. Overall, confidence in the equipment finance market is 42.5, steady with the November index of 42.8.

When asked about the outlook for the future, MCI-EFI survey respondent Dave B. Fate, CEO, Stonebriar Commercial Finance, said, “In the most recent survey, most opined that the markets would remain steady through early 2024 with very few signs anticipating dramatic changes in the next several months. Subsequent economic reports over the past two weeks, including the Fed’s announcement that further rate hikes are no longer forecasted, with various institutions predicting multiple rate cuts throughout 2024, the first of which some predict as early as March--have caused major positive shifts in sentiment in the bond and equity markets the past two weeks. Equity markets have rallied to all-time highs, mortgage rates dropped below 7%, and overall market sentiment has improved significantly, which I expect will continue in the coming months.”

December 2023 Survey Results:

The overall MCI-EFI is 42.5, relatively unchanged from the November index of 42.8.

• When asked to assess their business conditions over the next four months, 3.7% of the executives responding said they believe business conditions will improve over the next four months, an increase from none in November. 66.7% believe business conditions will remain the same over the next four months, down from 74.1% the previous month. 29.6% believe business conditions will worsen, an increase from 25.9% in November.

• 3.7% of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, up from none in November. 74.1% believe demand will “remain the same” during the same four-month time period, unchanged from the previous month. 22.2% believe demand will decline, a decrease from 25.9% in November.

• 3.7% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 11.1% in November. 74.1% of executives indicate they expect the “same” access to capital to fund business, unchanged from last month. 22.2% expect “less” access to capital, up from 14.8% the previous month.

• When asked, 18.5% of the executives report they expect to hire more employees over the next four months, an increase from 14.8% in November. 63% expect no change in headcount over the next four months, down from 77.8% last month. 18.5% expect to hire fewer employees, up from 7.4% in November.

• None of the leadership evaluate the current U.S. economy as “excellent,” a decrease from 3.7% the previous month. 85.2% of the leadership evaluate the current U.S. economy as “fair,” up from 81.5% in November. 14.8% evaluate it as “poor,” unchanged from last month.

• 3.7% of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, unchanged from November. 66.7% indicate they believe the U.S. economy will “stay the same” over the next six months, an increase from 44.4% last month. 29.6% believe economic conditions in the U.S. will worsen over the next six months, a decrease from 51.9% the previous month.

• In December, 14.8% of respondents indicate they believe their company will increase spending on business development activities during the next six months, unchanged from the previous month. 66.7% believe there will be “no change” in business development spending, down from 70.4% in November. 18.5% believe there will be a decrease in spending, an increase from 14.8% last month.

December 2023 MCI-EFI Survey Comments from Industry Executive Leadership:

Bank, Small Ticket

“Repeat business from existing customers remains strong. While other lenders have pulled back for various reasons, our program has remained consistent without major changes to credit requirements. However, we are seeing some of the fallout from increased equipment values that were a result of low inventory in 2020-2021.” Charles Jones, Senior Vice President, 1^st Equipment Finance (FNCB Bank)

Independent, Small Ticket

“Looking out to 2024, we expect sales of equipment and transportation to be softer.” James D. Jenks, CEO, Global Finance and Leasing Services, LLC

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.

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.

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

About The Equipment Leasing & Finance Foundation

The Equipment Leasing & Finance Foundation is a 501c3 non-profit organization that propels the equipment finance sector—and its people—forward through industry specific knowledge, intelligence, and programs that contribute to industry innovation, individual careers, and the overall betterment of the equipment leasing and finance industry. The Foundation is funded through individual and corporate donations. Learn more at www.leasefoundation.org.