One of the big pegs of the V-shapers is this idea that capital expenditures will fuel the expansion. The consumer is not spending, not in any great amounts anyway, government spending takes one only so far. The housing and auto markets may not be about to go into the cart anymore, but they’re not exactly healthy sectors. Something else is going to have to drive the expansion.
It’ll get buried beneath stories about home sales and Bernanke’s testimony, but this notion about capex took a hit today, too.
The Equipment Leasing and Finance Association reported that its monthly activity index fell 24% in January from a year ago:
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 January declined by 24 percent when compared to the same period in 2009.
We will point out, once again, that this time last year was just about the nadir for everything, so the fact that equipment financing is down this sharply from a year ago should be an eye-opener. And the source of that weakness is the one source that no amount of government largesse can engineer: demand.
“According to supplemental data, this downturn in new business volume is attributable, in large part, to a continued decline in customer demand for financing,” the group wrote. Later in the release, they make it clear also, that it’s not a lack of available financing: “Credit approvals increased to 71 percent in January, up from 65.2 percent in the same period in the previous year. A majority of participant companies reported that fewer transactions were submitted for approval during the month.”
“There still isn’t an awful lot of confidence that businesses are in a mode to spend on equipment acquisitions,” said Ralph Petta, interim president of the Washington-based leasing and financing association. “There just doesn’t seem to be a lot of demand.”
