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For Immediate Release
Nov. 7, 2003


CONNECTICUT BUSINESSES SAY THE ECONOMY IS IMPROVING ACCORDING TO CBIA QUARTERLY ECONOMIC SURVEY
Capital spending expected to increase


Connecticut businesses see improvements in the national and state economy over the fourth quarter of 2003. The biggest factor leading to that optimism is the expected increase of capital spending for their own firms and industries. Those are the major findings of the newest quarterly survey, released today by the Connecticut Business & Industry Association (CBIA).

     “This survey shows positive changes in the economy and is the most optimistic survey we have seen since the 2001 recession,” said CBIA Economist Peter Gioia. “It is an indication that Connecticut has benefited from the significant improvements in the U.S. gross domestic product (GDP) and the nationwide manufacturing improvements cited in recent economic reports.”

     Despite this good news, there are still a number of firms facing difficult challenges. The manufacturing sector, in particular, has been hurt more than other industries by high operating costs, global competition and unfair trade practices. “Our federal and state governments must work to create a climate that will encourage productivity gains, product innovation and fair international trade to ensure economic growth in the world marketplace,” said Gioia.

The Economy
According to the survey, the outlook for the national economy over the quarter has improved over last quarter’s positive news. Fifty-six percent of the business executives responding to the survey expect the national economy to improve over this quarter, compared with only 41 percent last survey (3Q03) and 18 percent two surveys ago (2Q03). Thirty-three percent expect conditions to stay the same, and only 11 percent expect conditions to worsen, down from 19 percent last quarter.

     Optimism regarding the state’s economy, while slightly tempered, shows much improvement from last quarter as well. More than three-quarters (78 percent) of the respondents expect the state’s economy to improve or stay the same, up from 59 percent last survey. Thirty percent believe Connecticut’s economy will improve somewhat or significantly. That’s up from only 15 percent in the last survey. Twenty-three percent of respondents expect the state’s economy to worsen, compared with 41 percent in the last survey.

     Business leaders who responded to the survey not only expect the economy to improve, but 80 percent believe conditions at their own firms will get better or stay the same. That number is up from 71 percent last quarter and 62 percent in the second quarter.


Capital Spending Improves
One of the biggest problems facing businesses since the new millennium began has been the slowdown in capital spending - purchases of equipment, computers, machinery and trucks. But, according to the survey, the spending plans of businesses responding are promising, with 26 percent planning to increase capital spending over the quarter. Fifty-seven percent of respondents expect no change in their capital spending, while 17 percent plan to cut back on purchases.

     Responses are even more positive for 2004, as 48% of respondents expect to increase capital spending next year. Another 41 percent expect to purchase the same amount next year as they purchased in 2003. Only 11 percent expect to decrease capital spending in 2004.

     “These numbers indicate that Connecticut has seen some of the effects of the national GDP growth, and the 2004 figures indicate that a real recovery in capital purchasing will take place in the state,” said Gioia.

Jobs and unemployment
The survey finds that employment issues continue to be a major challenge. Nineteen percent of respondents say they’ll increase the size of their work force, while 67 percent say it will remain stable and 14 percent expect to reduce the size of their work force. That number is an improvement from the last survey, when 22 percent of businesses responding said they would cut jobs. “The survey shows that sustained job growth will be a challenge and will lag real improvements in production and sales,” said Gioia.

Production and sales
Production and sales outlooks improved somewhat in this survey, after significant problems earlier in the year. Thirty-four percent of managers responding to the survey expect sales or production increases in the quarter, while 54 percent foresee conditions as stable, and only 11 percent expect production or sales to decrease. In the past three surveys, 20 percent or more of the respondents expected declining sales or production figures.

     “Productivity figures in this survey look good, but the key to future economic growth is increasing production and sales based upon more new orders,” said Gioia. Fifty-one percent of the respondents said that the most important factor in their company’s performance this quarter will be receiving new orders, which will increase sales.

     “Overall, the survey is encouraging news for Connecticut’s economy and state businesses,” said Gioia. “The improvements in capital spending as represented in the survey are a good indicator that business spending is getting back on track. The big question still left unanswered is when employment figures will improve in a similarly strong manner.”

Methodology
In October 2003, 2000 surveys were sent to business executives around the state. 245 surveys were returned, for a return rate of 12.3 percent and a margin of error of +/- 6 percent.

CBIA is Connecticut’s largest business organization, with 10,000 members.

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To arrange an interview with Pete Gioia, CBIA’s economist, or for a copy of the survey, please call Nancy Andrews, media relations manager, at 860-244-1957, or click here to download the pdf file.