New business volume in the equipment finance sector remains subdued according to the latest data from the Equipment Leasing and Finance Association (ELFA).
Its monthly leasing and finance index (MLFI-25) suggests March’s performance was 10% lower than in the same period last year.
The index shows overall new business volume for March was $8.2bn. Although volume was up 39% month-to-month from $5.9bn in February, cumulative new business volume was down 10% compared to the same period in 2018.
Receivables over 30 days were 1.9%, up from 1.8% the previous month and up from 1.7% for the same period last year. Charge-offs were 0.37%, up from 0.35% the previous month, and down from 0.51% in the year-earlier period.
Ralph Petta, ELFA president and CEO, said: “First quarter new business volume got off to a slow start, relative to Q1 last year. This was not unexpected given analysts’ expectations that equipment and software capex in 2019 could not realistically expect to keep pace with last year’s strong showing.
“The overall US economy continues to perform reasonably well. Unemployment is low; interest rates are favorable, with the Fed deciding to hold off on additional increases for a while; and the broader equity markets are stable. Credit markets appear healthy.
“Headwinds to this benign scenario include a softening in global economies and continued international trade frictions, particularly with China and Europe.”
Alan Sikora, CEO of First American Equipment Finance and a member of the ELFA board of directors, said: “Following a year of growth in 2018, the equipment finance industry experienced two consecutive months of year-over-year declines. Time will tell whether this decrease is simply a hangover from December stock market volatility or an early sign of weakness in the US economy.
“The U.S. equipment finance industry is massive and strong - no single company commands significant market share. As a result, not all companies are experiencing declines. First American Equipment Finance continues to grow, and we remain optimistic about the remainder of 2019.”
Separately, the Equipment Leasing & Finance Foundation’s Monthly Confidence Index (MCI-EFI) in April is 58.3, down from the March index of 60.4.
When asked to assess their business conditions over the next four months, 13.3% of executives responding said they believe business conditions will improve over the next four months, down from 20% in March.
Three quarters (76.7%) of respondents believe business conditions will remain the same over the next four months, an increase from 70% the previous month. 10% believe business conditions will worsen, unchanged from the previous month.
Just 13.3% of survey respondents believe demand for leases and loans to fund capital expenditures will increase over the next four months, a decrease from 23.3% in March.
Most (83.3%) believe demand will “remain the same” during the same four-month time period, an increase from 70% the previous month.
As regards future prospects, 6.7% of the survey respondents believe that US economic conditions will get “better” over the next six months, unchanged from March. Three quarters (73.3%) indicate they believe the economy will “stay the same” over the next six months, a decrease from 80% the previous month. Those believing economic conditions in the US will worsen over the next six months has risen to 20%, an increase from 13.3% in March.