For Immediate Release
Oct. 1, 2008

 

 

WALL STREET WOES HITTING CONNECTICUT'S CREDIT MARKET HARD

Survey finds unsettled business lending environment and lowest credit rating on record

 

Connecticut businesses are now being hit with the negative effects of the national economic slowdown and the financial crisis on Wall Street, and they're reporting an unsettled environment for business lending.

The third-quarter Connecticut Business & Industry Association (CBIA)/TD Banknorth Credit Survey, released today, finds business lending and credit conditions at their lowest level since the survey began in 2004.

“The tightening of local credit markets has largely been the result of the fallout seen on Wall Street and the continued decline in asset valuations,” said Donald Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven. “Many of these losses can be traced to the weak U.S. housing market, and the data strongly suggests that median housing prices may decline further before they stabilize. And many respondents are more concerned about the next three to six months than they are about today,” Klepper-Smith said.

More than a third (35 percent) of business respondents expect credit conditions to worsen; that's up from 21 percent last quarter. More than one in ten (13 percent) rated current credit conditions as either good or excellent. That's down from 23 percent last quarter and 30 percent a year ago.

“The increased odds of a national recession, together with job uncertainty and lower consumer confidence, show that the Connecticut economy is now being adversely impacted by conditions outside the state, creating what many are now perceiving as a risk averse credit environment,” said Peter Gioia, CBIA vice president and economist. “Many expect that environment to continue to deteriorate in the months ahead.”

“Weakness in the national economy is clearly hurting Connecticut, but state businesses that require timely access to cost-effective capital to keep their companies functioning are still able to secure funding,” said Michael T. Schweighoffer, Connecticut president, TD Banknorth. “All indications are that Connecticut banks are holding up better than their national counterparts, and their ability to continue to give credit is critical to secure future business investments in the state.”

The CBIA/TD Banknorth Credit Availability index fell to 19 in the third quarter of 2008, down 56 percent from the last quarter, and is at its lowest level since the survey began four years ago. And there is even greater concern about future credit conditions. That index dipped to only 12 —down 67 percent from last quarter. The current credit conditions index also dropped sharply, to 27. (Any reading over 50 indicates a positive view of overall credit conditions, while a reading under 50 denotes deterioration.) The Total Credit Availability Index is a composite measurement of current credit availability (27) and future expectations (12).

CBIA/TD Banknorth Total Credit Availability Index	3Q08
CBIA/TD Banknorth Total Credit Availability	19
CBIA/TD Banknorth Future Expectations Index	12
CBIA/TD Banknorth Current Credit Availability	27

 

“Going forward, job growth will be the key to overall economic health,” said Gioia. “If consumers can retain their jobs, they can pay their mortgages, and the same is true of businesses. If Connecticut companies can maintain sales levels and stabilize profits, that will help alleviate some of the pressures in the local credit markets.”

The credit survey was conducted by CBIA and Klepper-Smith and sponsored by TD Banknorth. The methodology used to determine the index is similar to that used by The Conference Board to calculate consumer confidence measures. The survey was e-mailed to approximately 2,000 Connecticut businesses in mid-September 2008. A total of 260 executives responded, for a 15 percent response rate and a margin of error of plus or minus 6.1 percent.

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CBIA is the state's largest business organization, with 10,000 member companies.

 

For more information contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com.

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