Equipment leasing confidence steady in November
General confidence in the equipment leasing industry stayed steady in November with an index of 56.1, which is a slight increase from October.
The Equipment Leasing & Finance Foundation released their November 2020 Monthly Confidence Index for the Equipment Finance Industry (MCI-EFI) today. The index found confidence in the equipment finance market remained steady at 56.1, which is a slight increase from the October index of 55.0. This is the third straight month the index has stayed at 55 or higher and is a sharp increase from the lows of 22.3 and 25.8 recorded in April and May during the height of the COVID-19 pandemic’s disruption on the manufacturing industry.
The foundation also released highlights of the COVID-19 Impact Survey of the Equipment Finance Industry, a monthly survey of industry leaders designed to track the impact of the coronavirus pandemic on the equipment finance industry. Among the highlights:
- 54% of companies expect that the default rate will be greater in 2020 than in 2019, down from 56% in October; 35% expect it to be the same, unchanged from last month; and 11% expect it to be lower compared to 9% last month.
- Only 4% of lenders reported having more than 10% of their portfolio now under deferral, down from 7% of lenders last month.
- The largest percentage of respondents (69%) have 0.01-4.99% of dollars outstanding currently under payment deferral in their owned portfolio.
When asked to assess their business conditions over the next four months, 26.9% of executives responding said they believe business conditions will improve over the next four months, down from 29.6% in October. 53.9% believe business conditions will remain the same over the next four months, an increase from 51.9% the previous month. 19.2% believe business conditions will worsen, an increase from 18.5% in October.
Just under a fifth (19.2%) of the survey respondents believe demand for leases and loans to fund capital expenditures (capex) will increase over the next four months, down from 22.2% in October. 69.2% believe demand will “remain the same” during the same four-month time period, an increase from 66.7% the previous month. 11.5% believe demand will decline, relatively unchanged from 11.1% in October.
When asked, 23.1% of the respondents expect more access to capital to fund equipment acquisitions over the next four months, down from 33.3% in October. 76.9% of executives indicate they expect the “same” access to capital to fund business, an increase from 66.7% last month. None expect “less” access to capital, unchanged from the previous month.
When asked, 30.8% of the executives report they expect to hire more employees over the next four months, up from 25.9% in October. 57.7% expect no change in headcount over the next four months, a decrease from 63% last month. 11.5% expect to hire fewer employees, relatively unchanged from 11.1% in October.
None of the leadership evaluate the current U.S. economy as “excellent,” unchanged from the previous month. 76.9% of the leadership evaluate the current U.S. economy as “fair,” up from 55.6% in October. 23.1% evaluate it as “poor,” down from 44.4% last month.
Over a third (34.6%) of the survey respondents believe that U.S. economic conditions will get “better” over the next six months, an increase from 25.9% in October. 50% indicate they believe the U.S. economy will “stay the same” over the next six months, a decrease from 59.3% last month. 15.4% believe economic conditions in the U.S. will worsen over the next six months, up from 14.8% the previous month.
In November, 26.9 % of respondents indicate they believe their company will increase spending on business development activities during the next six months, an increase from 22.2% last month. 69.2% believe there will be “no change” in business development spending, a decrease from 70.4% in October. 3.9% believe there will be a decrease in spending, down from 7.4% last month.