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October 2007 — Vol. 85, No. 8

Connecticut businesses concerned about national credit woes

Will subprime mortgage crisis affect Connecticut’s economy?

 

Business executives are concerned about the possible spillover effect of the national subprime mortgage crisis and whether it could affect their ability to get financing in the future. But current credit conditions in the state are still good, according to the third-quarter 2007 CBIA/TD Banknorth Credit Availability Index and Survey.

Expectations about future credit conditions have fallen for the second consecutive survey and are at the lowest levels since the survey was first conducted, in 2004. More than a third (37%) of the survey respondents expect credit conditions to deteriorate in the coming months, up from 17% in the second quarter and 10% in the first quarter of the year.

Despite the concerns about the future, the majority (82%) of the respondents said credit availability is not currently a problem for their firms. Nearly a third (30%) rated current credit conditions in Connecticut as either good or excellent, down from 37% in the second quarter and 42% in the first quarter. Twenty-one percent rated conditions as either poor or fair, up from 16% in the second quarter.

The survey was conducted by CBIA and Donald Klepper-Smith, chief economist and director of research for DataCore Partners, and was sponsored by TD Banknorth. The survey is used to measure executives opinions on the health of Connecticut’s credit markets, expressed in three separate indicators: the Total Credit Availability Index, the Future Expectations Index and the Current Credit Availability Index.

The Total Credit Availability Index (45 in this survey) is a composite measurement of current credit availability (59) and future expectations (30). A reading above 50 indicates improvement in credit conditions, while readings below 50 indicate deterioration.

“While this is the second quarter in a row that the overall credit availability index reading has dipped below the crucial level of 50, this ongoing corrosion of confidence is driven mainly by speculation over future conditions, not current conditions, which are holding up and have yet to see meaningful deterioration,” said Klepper-Smith.