Equipment finance industry confidence dips in April as lenders await rate cuts

News that interest rate cuts might not materialize for several months has pushed confidence in the equipment finance sector slightly downward, according to new data from the Equipment Leasing and Finance Foundation. 

The ELFF publishes monthly reports that survey lenders. In April, the index ranked industry confidence at 52.9, down slightly from last month’s high of 55.2 but still the second-highest index rating in the past two years.  

U.S. Federal Reserve Chair Jerome Powell said earlier this week that since inflation rates remain elevated, it’s unlikely that the Fed will make interest cuts until later this year, at the earliest. Officials also said this week that they expect three rate cuts in 2025, instead of four.  

“The overspending by the federal government is contributing greatly to driving up inflation,” James Jenks, chief executive of Scottsdale, Ariz.-based Global Financal and Leasing Services, told ELFF in its report this week. 

BY THE NUMBERS:

Other results of the ELFF poll: 

• Of 28 executives surveyed, 10.7% said they expect business conditions to improve over the next four months, down from 19.4% in March. The majority — 85.7% — said business conditions will stay the same, up from 77.4% last month, and 3.6% of respondents believed the business environment will stay the same, up slightly from 3.2% in March.  
• The number of lenders expecting demand for leases and loans that fund capital expenditures to increase in the next four months decreased 7.1% in April from 25.8% in March. Those who said they expect demand to remain the same totaled 92.9%. None of the lenders in the latest survey said they expect demand to decline.  
• 14.3% of lenders said they expect more access to capital to buy equipment in April, down from 16.1% in March. 14.3% are expecting “less” access to capital in the coming four months, up from 9.7% the prior month.  
• 17.9% of executives said they will hire more employees in the next four months, down from 19.4% last month. 71.4% said they expect no changes in headcount, while 10.7% said they’ll hire less – down from 12.9% in March.  
• Another 17.9% of lenders said they expect their company will spend more on business development activity in the next six months, down from 22.6% the prior month. 78.6% anticipate no change in spending, while 3.6% expect to spend less, which is down from 12.9% the prior month.  

Worsening economic outlook 

Mirroring results from the March survey, none of the leadership surveyed by ELFF rated the United States economy as “excellent” in April. More executives rated the economy as “poor” — 7.1%, up from 6.5% the prior month. Some 92.9% leadership evaluated the economy as “fair,” down slightly from 93.6% in March.  

And fewer executives anticipate positive economic changes in the next six months: 71.4% believe the economy will remain the same, while 17.9% said they expect the economy to get better, down from 25.8% in March. Some 10.7% predict the economy will worsen, down from 19.4% the prior month.  

“Monetary policy has not been as effective in taming inflation that recently came in at an annual rate of 3.2%,” Mark Bonanno, chief operating officer at Norwalk, Conn.-based North Mill Equipment Finance, told ELFF. “The U.S. government as well as the consumer (via credit cards) have unsustainable debt levels, and that will eventually cause cracks in the economy.”