A measure of business activity sank in July from June, though it rose slightly from a year ago, as 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 July, 2 percent more than a year ago but 22 percent less than in June, the Equipment Leasing and Finance Association (ELFA) said.
Anecdotally, all of the business we're seeing is in the replacement world, it's not in the expansion world, ELFA Chief Executive William Sutton said.
Many businesses were hesitant to spend on new equipment amid chaotic congressional debate over deficit reduction and tax reform, uncertain global economic trends and turbulent financial markets, he noted.
We are seeing a slow but plodding recovery, Sutton added.
Demand for loans for investment in everything from industrial equipment to computer systems and office furniture has risen 24 percent so far this year versus the same period a year ago, But 36 percent of responding companies said their volume has declined.
All aspects of the economy -- everything from healthcare to construction, transportation, IT -- all of the different areas that our members finance equipment for, see all uneven activity, Sutton said.
ELFA represents lenders who finance half of the capital investment in the United States each year. The group reports economic activity for the $521 billion equipment finance sector.
A monthly confidence gauge also slid as companies pulled back on spending amid a wave of tepid economic reports and violent market swings during the federal budget debate.
The Equipment Leasing & Finance Foundation's confidence index fell 11 percent to 50 in August.
There's still a large percentage of executives that say things will at least stay the same, maybe get a little better, so it's not a totally dire picture but it's not as positive as we'd like it to be, said Sutton.
Total headcount for equipment finance companies was little changed in the month and from a year ago.
Credit standards tightened in July as lenders approved fewer lease applications.
Fifty-nine percent of the surveyed companies said they submitted more transactions for approval in the month, down 63 percent from June.
ELFA said 2.7 percent of borrowers were delinquent 30 days or more, up from 2.5 percent in June but down 21 percent from a year earlier.
Charge-offs, which reflect loans unlikely to be repaid, dropped 37 percent in July from June and fell 50 percent from a year ago.
ELFA members include Bank of America Corp
(Reporting by Lynn Adler, editing by Matthew Lewis)