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October 3, 2019 4:15 PM, EDT

Equipment Financing Shoots Up 3% in August, Says ELFA

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Overall new business activity for 25 key American equipment financiers was up 3% to $9.2 billion in August, year over year, according to the Equipment Leasing and Finance Association.

ELFA released on Sept. 26 its Monthly Leasing and Finance Index (MLFI-25), a barometer of the trends in U.S. equipment investment.

Equipment financing helps all types and sizes of commercial businesses to acquire the equipment they need to operate and grow.

The index represents “a cross section of the $1 trillion equipment finance sector,” according to ELFA. Volume was down 2% month-to-month from $9.4 billion in July.

Year to date, cumulative new business volume was up 3% compared with 2018, the report found, while credit approvals surged to 76.6% from 75.7% in July.

“August has been a pretty good month,” said Ralph Petta, CEO of the association. “We expect when all is said and done (2019) will be a pretty good year.”

August monthly and year-to-date new origination volume activity demonstrated an increase over 2018’s monthly and year-to-date results, according to Richard E. Barry, president of Merchants Bank Equipment Finance. The August MLFI-25 points to the continued desire of business owners to invest in capital equipment for their enterprises, Barry said in the Sept. 26 report.

Ralph Petta

Petta 

Petta said expectations at the beginning of the year were unsure, as 2019 started slowly. In trucking, the freight industry began to slow down after a boom in late 2017 and most of 2018. The positive effects of President Donald Trump’s tax cuts, passed in 2017, also began to wane, Petta said.

Pockets of the manufacturing and equipment-intensive economy were also problematic, Petta said, referring to mining, energy and agriculture.

The ELFA report confirms growth in economic activity in mid-2019, but also confirms pockets of unease others are seeing.

On Oct. 3, the Institute for Supply Management projected “continued growth in the non-manufacturing sector, at a slower rate,” ISM officials said.

“The non-manufacturing sector pulled back after reflecting strong growth in August,” said Anthony Nieves, ISM chairman, citing concerns about “tariffs, labor resources and the direction of the economy.”

Contributing to unease was a poor 2019 farm season, according to Aaron Terrazas, director of economic research for Convoy, a Seattle-based digital freight network and load-matching company. But August showed renewed strength, he said.

“The freight economy struggled through the end of 2018 to the summer of 2019,” Terrazas said. “We started to see some green shoots in August.”

Terrazas said much of the potential economic growth in the next six months depends on the U.S. consumer. While people have expressed economic anxiety about a possible recession, or trade tariffs, or possible impeachment of Trump in the U.S. House of Representatives, so far the U.S. consumer appears mostly confident, and not pulling back from spending.

“While people say they are skittish, their credit card is on fire,” said Terrazas.

Consumer borrowing surged in July at its fastest pace since late 2017, driven by a big jump in credit card use, the Federal Reserve said Sept. 9 of its latest data. Consumer borrowing increased by $23.3 billion in July (after a $13.8 billion advance in June), led by a $10 billion increase in the borrowing category covering credit cards in July after having fallen by $186 million in June.

Five components included in the ELFA survey: new business volume (originations), aging of receivables, charge-offs, credit approval ratios (approved vs. submitted), and headcount for the equipment finance business..

The 25 members of the MLFI-25 include Volvo Financial Services.

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