Capitas Finance | News

Increase in US equipment finance market despite ongoing concerns regarding global economic situation

The Equipment Leasing & Finance Foundation (the Foundation) has reported that November’s reading of confidence in the US equipment finance market is 57.4, up from the October index of 50.7, indicating an increase in optimism about business activity despite ongoing concerns about the global economic situation.

Currently the majority of lessors and intermediaries in Europe are enjoying as much business as they want to handle, at satisfactory margins. Does the uplifted US confidence index mirror the situation in Europe, though? Possibly not for those lessors whose parent bank have suddenly become embroiled in the eurozone problems of Greece, Italy, Spain, and now with Austria’s wobbles, all of central and eastern Europe.

But probably the answer is Yes in the case of smaller banks with niche markets, and those large banks that have escaped sovereign debt exposure. It will be interesting to see if the Leaseurope /Invigors Confidence Survey due in January 2012 will reflect the eurozone’s latest problems, or if the aggregating of good and bad leads to a seemingly positive average? Leaseurope’s Index may not capture any changes either, as lease accounting KPIs, bless them, continue to portray the world six months ago. Meanwhile the economic backdrop is negative, some liken it to watching a violent and unpredictable storm raging outside your window, but inside the house things seem quite comfortable, save for a niggling and disquieting sense of unreality.

However, back to the US and the Foundation’s confidence index:

• 70.3 percent believe demand will “remain the same” during the same four-month time period, up from 68.3 percent the previous month. 24.3 percent of their survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, an increase from 17.1 percent in October. 5.4 percent believe demand will decline, down from 14.6 percent who believed so in October.
• 100 percent of executives expect the same, or more, access to capital to fund equipment acquisitions over the next four months
• 75.7 percent expect no change in headcount over the next four months, a decrease from 78 percent last month, while 8.1 percent expect fewer employees, an increase over October.
• 86.5 percent of survey respondents indicate they believe the U.S. economy will “stay the same” over the next six months, up from 78.0 percent in October, while 13.5 percent believe that U.S. economic conditions will get “better” over the next six months, up from 4.9 percent in October. No one responded that they believe economic conditions in the U.S. will worsen over the next six months, an improvement from 17.1 percent who believed so 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 can be gauged from the following opinions voiced:
• Bank, Large Ticket: “Business activity remains steady despite the headline news about a potential double dip and economic head winds.”
• Bank, Middle Ticket:“Cautious optimism on current economic conditions improving modestly over the next 6-18 months, continued pent-up demand/need to replace equipment in the near term, and a favourable interest rate climate should drive continued increases in equipment finance volume. Housing, timber, construction, transportation, and nurseries will remain soft into the 2nd quarter of 2012.”
• Independent, Small Ticket: “The industry seems to be faring better than most segments of the commercial lending markets. We are beginning to see activity of business expansion for some of our clients.  We are also experiencing some level of a stronger cycle of equipment replacement underway. Although there is still much uncertainty, small businesses that are profitable are beginning to move forward at a more aggressive pace than we have seen in the past six months.”