U.S. Business Equipment Borrowings Decline in July, ELFA Reports

What's Happening?

The Equipment Leasing and Finance Association (ELFA) has reported a 6.8% decrease in U.S. business equipment borrowings for July compared to the same month last year. Despite this year-over-year decline, there was a 1.7% increase in borrowings from June to July. The ELFA, a Washington-based trade association, monitors economic activity in the equipment sector, which is valued at over $1 trillion. The association also noted an increase in the average credit approval rate to 78.2% in July, marking the highest level in two years. This upward trend in approval rates has been ongoing since November 2024. Keith Duggan, CEO of First National Capital Corporation, commented on the potential positive impact of 'onshoring' manufacturing driven by tariffs, although he noted that demand has yet to fully develop.

Why It's Important?

The decline in equipment borrowings suggests a cautious approach by U.S. businesses towards capital investments, possibly due to economic uncertainties or changing market conditions. The increase in credit approval rates, however, indicates a more favorable lending environment, which could encourage future investments. The trend towards 'onshoring' manufacturing, as mentioned by Keith Duggan, could have significant implications for the U.S. economy, potentially boosting domestic production and reducing reliance on foreign manufacturing. This shift may lead to increased demand for equipment financing in the long term, benefiting the equipment leasing and finance industry.

What's Next?

As businesses continue to navigate economic challenges, the equipment leasing and finance sector may see fluctuating demand. The ELFA's confidence index, which eased to 60.2 in August, suggests a cautiously optimistic outlook. A reading above 50 indicates a positive business sentiment, and continued improvements in credit approval rates could further support this trend. Stakeholders in the equipment finance industry will likely monitor these developments closely, as they could influence future investment decisions and economic growth.