Equipment Finance Economic Activity shows modest growth.
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Press Release Summary:
Monthly Leasing and Finance Index (MLFI-25) shows overall new business volume for June up 6% against same period in 2009 and up 25% compared to prior month. Receivables over 30 days declined to 3.3%, while charge-offs showed slight increase from prior month but steep decline from one year earlier. Also, number of credit approvals climbed to 70% in June, and 2/3 of participating organizations reported submitting more transactions for approval during month.
Original Press Release:
Equipment Leasing and Finance Association's Survey of Economic Activity: Monthly Leasing and Finance Index
Data Shows Modest Industry Growth But Future Confidence Levels Still Uncertain
Washington, DC - 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 June increased six percent when compared to the same period in 2009. When compared to the prior month, the MLFI-25 reported new business volume increased by 25 percent, from $4.4 billion to $5.5 billion. After 20 consecutive months of declines, business volume has shown positive year-over-year growth each month during the second quarter ended June 30.
Portfolio quality is also improving. Receivables over 30 days declined to 3.3 percent, down from 4.0 percent in the prior month and 4.1 percent in the year-earlier period. Charge-offs, while increasing slightly from the prior month, showed a steep decline when compared to the year earlier period.
The number of credit approvals climbed to 70 percent in June, up from 65 percent in the same period the prior year. Two-thirds of participating organizations reported submitting more transactions for approval during the month. Finally, total headcount for equipment finance companies remained steady in the May-June period. Construction, truck transportation and small business continue to lead the underperforming sectors.
A related index, the Equipment Leasing & Finance Foundation's Monthly Confidence Index (MCI-EFI), for July was at 57.6, a decrease from the June 2010 index of 65.2.
"While volume has improved, we are seeing an increase in month-to-month renewals of existing leases as customers are still hesitant to commit to new capital spending for expansion in what still appears to be a volatile economy," said Jim McGrane, President, EverBank Commercial Finance. "In the healthcare market, for instance, the wave of demand anticipated after passage of the American Recovery and Reinvestment Act has not kicked in as practitioners have not rushed to take advantage of expected reimbursements."
McGrane added, "In general, demand for the equipment we finance is still soft, while credit quality and payment experience have been improving consistently, which we see as setting a positive foundation for future growth."
"Based on our data, the equipment finance industry continues to show gradual but steady growth," said William G. Sutton, ELFA President. "Demand for capital equipment seems to be strengthening, albeit at a slow pace, and credit quality is slowly improving as well."
About the ELFA's MLFI-25
The MLFI-25 is the only index that reflects capex, or the volume of commercial equipment financed in the U.S. 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 latest Monthly Leasing and Finance Index, including methodology and participants is available below and also at www.elfaonline.org/ind/research/MLFI/
MLFI-25 Methodology
The ELFA produces the MLFI-25 survey to help member organizations achieve competitive advantage by providing them with leading-edge research and benchmarking information to support strategic business decision making.
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 vs. submitted) and headcount for the equipment finance business.
The MLFI-25 measures monthly commercial equipment lease and loan activity as reported by participating ELFA member equipment finance companies representing a cross section of the equipment finance sector, including small ticket, middle-market, large ticket, bank, captive and independent leasing and finance companies. Based on hard survey data, the responses mirror the economic activity of the broader equipment finance sector and current business conditions nationally.
ELFA MLFI-25 Participants
ADP Credit Corporation
Bank of America
Bank of the West
Canon Financial Services
Caterpillar Financial Services Corporation
CIT
De Lage Landen Financial Services
Dell Financial Services
Fifth Third Bank
First American Equipment Finance
GreatAmerica
Hitachi Credit America
HP Financial Services
John Deere Credit Corporation
Key Equipment Finance
Marlin Leasing Corporation
National City Commercial Corp.
RBS Asset Finance
Regions Equipment Finance
Siemens Financial Services
Susquehanna Commercial Finance, Inc.
US Bancorp
Tygris Vendor Finance
Verizon Capital Corp
Volvo Financial Services
Wells Fargo Equipment Finance
About the ELFA
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. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its over 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. For more information, please visit www.elfaonline.org
ELFA is the premier source for statistics and analyses concerning the equipment finance sector. Please visit www.elfaonline.org/ind/research/ for additional information.
The Equipment Leasing & Finance Foundation is the non-profit affiliate to the Equipment Leasing and Finance Association, providing future-focused research to the equipment finance industry. For more information please visit the website at www.leasefoundation.org
