A business activity gauge was unchanged in August from July, though sharply higher than a year ago, as heightened economic and regulatory uncertainties kept many corporations from new spending, a lender group said on Monday.
U.S. businesses originated $5.7 billion in loans, leases and lines of credit in August, the same as the prior month and 33 percent more than a year earlier, the Equipment Leasing and Finance Association (ELFA) said.
Lending and credit quality are steadily improving, with new business volume up 25 percent so far this year. Company spending remains focused on replacing aging equipment rather than for expansion, said ELFA Chief Executive William Sutton.
"If the economy somehow could move into an expansion mode, then you’re going to see people start investing more in growth strategies as opposed to just maintenance strategies," he said in an interview.
Concerns about the global economy and ripple effects on industry further eroded a monthly confidence gauge. The Equipment Leasing & Finance Foundation’s confidence index fell 4.8 percent to 47.6 in September.
"We see a steady upward trend for the last 18 months in new business volumes," Sutton said.
"However, looking out four months, all of the worries surrounding the global economic environment, and the unknowns with regulatory and legislative activities, make them a little less confident going forward."
ELFA represents lenders who finance half of the capital investment in the United States each year, everything from office equipment to aircraft.
The group reports economic activity for the $521 billion equipment finance sector.
"Even if the economic recovery slows, businesses have a need to replace older, essential-use equipment that they have put off replacing for too long," Ron Arrington, global president of CIT Vendor Finance, said in a statement.
Credit quality measures also improved in August, according to ELFA.
More than two-thirds of surveyed companies said they submitted more transactions for approval in the month. Credit standards relaxed and lenders approved more lease applications.
ELFA said 2.5 percent of borrowers were delinquent 30 days or more, down from 2.7 percent in July and 42 percent below the year-ago level.
Charge-offs, which reflect loans unlikely to be repaid, fell 54 percent in August to the lowest level in more than two years.
Total headcount for equipment finance companies changed little in August from July and declined 2 percent from a year ago.
Farming and mining equipment as well as healthcare were among the stronger segments while construction and trucking industries were among the weakest.
ELFA’s monthly index is based on a survey of 25 member organizations.
