The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $518 billion equipment finance sector, showed overall new business volume for February declined 3 percent when compared to the same period in 2009. When shown against the prior month, the MLFI-25 reported new business volume decreased by 6 percent, from $3.4 billion to $3.2 billion. (In the past four years, the average January to February decline averaged about 17 percent.)

 

According to a separate survey commissioned by CFO.com, capital spending is expected to increase 9 percent in 2010.

 

Tempering this advance in new business volume is February data showing a noticeable increase in delinquencies. Receivables over 30 days rose significantly when compared to both the prior month and year-earlier period. However, upon further analysis, this anomaly appears to be the result of one outlier respondent that reported a larger than usual number in the 30- to 60-day receivables bucket. Charge-offs increased to 1.89 percent, up from 1.68 percent in the prior month. 

 

Credit approvals decreased to 69 percent in February, up from 65 percent in the same period the prior year. Almost half of participating organizations reported submitting fewer transactions for approval during the month. Total headcount for equipment finance companies decreased by 1 percent in the January-February period. 

 

And, once again, the construction and trucking transportation industries led the underperforming sectors.

 

“The fact that February new business volume is down compared to February 2009's anemic numbers tells you that we still have a long way to go in the economic recovery,” said Thomas Jaschik, president, BB&T Equipment Finance, located in Towson, MD. “Businesses continue to lack the confidence to make substantial investments in capital equipment. The increase in delinquencies and charge-offs from January to February has a seasonal factor associated with it, but is not a trend you like to see given the run up in these two items in 2009.”

 

“Recent anecdotal information from ELFA members as well as hard data here seem to indicate that the nascent economic recovery is giving at least some businesses reason to feel confident about investing in capital assets,” said Ralph Petta, ELFA interim President. “Hopefully, as we move in to the second quarter of the year and beyond, this growth trend continues and is sustainable,” Petta said.

 

A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for March was at 60.1, relatively on par with February 2010 index of 60.6.

The MCI-EFI is a monthly survey of equipment finance industry executive leadership that provides a qualitative assessment of both the prevailing business conditions and expectations for the future. Since the same organizations provide the data from month to month, the results constitute a consistent barometer of the industry’s confidence. 

The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the United States. The MLFI-25 is released globally at 9 a.m. Eastern time from Washington, D.C. each month, on the day before the U.S. Department of Commerce releases the durable goods report. The MLFI-25 is a financial indicator that complements the durable goods report and other economic indexes, including the Institute for Supply Management Index, which reports economic activity in the manufacturing sector. Together with the MLFI-25 these reports provide a complete view of the status of productive assets in the U.S. economy: equipment produced, acquired and financed.

 

The MLFI-25 is a barometer of the trends in U.S. capital equipment investment. Five components are included in the survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios, (approved versus submitted) and headcount for the equipment finance business.

The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $518 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. Its more than 600 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers.