Clouding of the business outlook in leasing – will the expansion in equipment investment continue?

The business climate in leasing clouded over noticeably in the second quarter of 2006. Although the current business situation was seen a little more favourably by the surveyed firms, they were clearly more cautious regarding the business outlook to the end of the year. In light of increasing demand, more leasing companies (24%) than before appraised second-quarter business as good, 74% as satisfactory and only 2% of the survey participants found the current situation to be deplorable. For the second half of the year the firms were clearly less optimistic: on balance, only every tenth leasing company expects better business (previous quarter: +38%). Employment in leasing is showing stabilisation tendencies. Whereas in the first quarter of 2006 there was an increase in employment of ca. 3.5%, in the second quarter this was only a modest ¼%. It was clearly evident that the smaller enterprises expanded their personnel moderately but the mid-sized and larger leasing companies clearly reduced staff. In the coming months the chance of an expansion in employment have be reduced. The investments in plant and equipment began the new year on an up-beat but weakened in the second quarter. Nevertheless the chances for further growth in the second half year are still good. Also the leading indicator for investment based on the short-term future appraisals of the leasing companies compiled by the Ifo Institute and the federal association of leasing companies (BDL) points to higher equipment investments in 2006 over the previous year. The indicator also shows that the previous growth pace will not be maintained.