Capex weakens

Here's a interesting statistic I ran into while doing a little bit of research. The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity for the $650 billion equipment finance sector, showed overall new business volume for April declined by 42.5% when compared to the same period in 2008.

Month-to-month volume fell by 12.8% in April. The association said that tight credit and the recession continue to impede new business volume, but April trends offer some reason for optimism.

Although capital spending makes up a much smaller percentage of GDP, it is a key driver of business cycles in the US. During economic expansions, business spending accelerates as companies invest to satisfy demand for products, and capex helps to drive the cycle. Conversely, when economic times become more difficult, companies slash outlays, deepening an ongoing recession.

ELFA said this is the only index that reflects capex, or the volume of commercial equipment financed in the US.