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March 3, 2003

ECONOMIC CONDITIONS HAVE SIGNIFICANTLY DETERIORATED, ECONOMY HAS STALLED, STATE PURCHASING MANAGERS SAY

HARTFORD, Conn. - After showing signs of a recovery, economic conditions in Connecticut are again deteriorating, according to purchasing managers from across Connecticut.

Those responding to the latest quarterly survey (first quarter of 2003) conducted by the Connecticut Business & Industry Association and the Connecticut Association of Purchasing Management have serious doubts that economic conditions will turn around in the near future. The number of respondents with poorer outlooks for their own industries and for the economy in general rose significantly.

In fact, 36 percent of those responding in the first quarter of 2003 said the outlook for their industries is for worsening conditions, compared to 18 percent making that prediction in the second quarter of 2002. Thirty-three percent of respondents said their outlook for the economy in general will worsen, compared to 17 percent expressing that view in the second quarter of 2002.

And 71 percent of those responding say their companies have reduced their operating budgets due to the economy, with a median reduction of 10 percent.

"The respondents' answers indicate that firms are struggling with weak economic conditions," said Peter M. Gioia, CBIA economist. "Signs of recovery have disappeared in these results."

"The worsening performance in new orders reinforces the respondents' anxiety over the year- long performance for their industry and their own company," said John H. Fittz, president of CAPM.

The purchasing managers' surveys are key indicators of future economic activity. The new CBIA/CAPM survey indicates very challenging conditions for production, orders and employment levels at Connecticut companies.

Specifically:

  • Production levels, which had climbed in the second quarter of 2002 and then remained steady, have sunk to early 2002 levels. Only 18 percent of those responding in the first quarter of 2003 see stronger production levels, down from 27 percent in the fourth quarter of 2002 and only three percentage points above a survey-record low of 15 percent in the first quarter of 2001.

  • New orders declined significantly from last quarter and are slightly below last year's figures. Only 20 percent of respondents reported more orders this quarter, compared to 27 percent in the fourth quarter of 2002, while 43 percent see fewer orders. Last year at this time, 21 percent had more orders and 45 percent saw fewer orders.

  • Inventories of finished goods increased, with 14 percent showing larger inventories and 39 percent smaller inventories this quarter, compared to 9 percent showing larger inventories and 40 percent showing smaller ones in the fourth quarter of 2002.

  • The soft economy continues to keep new hiring weak. Only 9 percent of the respondents said their companies have added workers compared to 13 percent last quarter. Meanwhile, 35 percent of first-quarter 2003 respondents said they have trimmed their workforces, compared to 30 percent who said that in the fourth quarter of 2002.

The survey was conducted by e-mail and by U.S. Mail Feb. 3-25. A total of 225 respondents answered the survey for a return rate of 15 percent and a margin of error of plus or minus 6.7 percent.

CBIA is the state's largest business organization, with 10,000 member companies throughout Connecticut. CAPM is the Connecticut chapter of the Institute for Supply Management (formerly National Association of Purchasing Management).

Media wishing to attend the event should contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com.

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