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| For Immediate Release August 30, 2004
CBIA RELEASES CONNECTICUT CREDIT AVAILABILITY
SURVEY Connecticut businesses say that the availability of credit across the state is very good but that they are borrowing less because of uncertain economic conditions, including fears of inflation, according to the CBIA/Banknorth Credit Availability Index and Survey. The survey was conducted by the Connecticut Business & Industry Association (CBIA) and Donald Klepper-Smith, chief economist and director of research, DataCore Partners, and sponsored by Banknorth. It measures business executives’ opinions on the health of Connecticut’s credit markets. The majority of respondents (52 percent) rated current credit availability as either good or excellent, the same as last quarter. Forty-five percent of respondents rated the lending climate as average or fair this quarter, compared with 41 percent last quarter. Only 3 percent rated it as poor, compared with 6 percent last quarter. “This survey confirms that the economy is indeed on track and that businesses have available credit to expand and continue to grow their companies. But the fear of inflation has many exercising caution,” said Peter Gioia, CBIA economist. Respondents said that future conditions, six months from now, are apt to deteriorate slightly as the Federal Reserve begins to take action to fight inflation. Eighty-eight percent of respondents said they expected conditions to improve or stay the same, down from 91 percent last quarter. Thirteen percent expect credit conditions to deteriorate. That’s up from 9 percent last quarter. The share of respondents who indicted that credit availability was a problem for their company rose to 34 percent, compared with 20 percent last quarter, indicating a slight tightening of credit conditions since the last survey. Only 33 percent of respondents reported using financing over the past 12 months to meet their credit needs, compared with 56 percent last quarter. But fewer companies are obtaining traditional bank loans to meet their financial needs. Twenty percent reported receiving bank loans. That’s less than half of the 46 percent of respondents who received bank loans last quarter. Businesses reported going elsewhere for their financing needs, including obtaining private and government-sponsored loans and utilizing stocks and business earnings. When asked how they would use additional credit for their businesses, respondents had several top answers. Fifteen percent said they would invest in new plants and equipment. Thirteen percent said they would hire more employees, the same percentage would expand export activities and an additional 13 percent would expand new operations, stores or branches. Only 14 percent said they did not need additional credit, compared with 30 percent last quarter. “It’s critical for businesses to compete in today’s global marketplace, and this survey shows that more businesses are trying to do just that,” said Banknorth President John Patrick. “Companies are still looking to expand their operations and expand their export activities in order to grow their business here in Connecticut.” The CBIA/Banknorth Credit Availability Index (CBIA/BNCAI), which indicates the health of the state’s credit markets and measures the quality of credit conditions across the state, had a favorable reading of 74 in this survey, down one point from last quarter. A reading over 50 indicates improvement in credit conditions, while readings below 50 indicate deterioration. The index is a composite measurement of current credit conditions (81) and future expectations (68), which reflect an environment in which interest rates are apt to rise gradually for the remainder of 2004. “A current credit condition reading of 81, up from last quarter’s initial reading of 78, shows that there is significant financing available to businesses across the state,” said Klepper-Smith. “Even though interest rates have begun to climb, and respondents are concerned with inflation, there is both need and ample credit available to help Connecticut businesses continue to flourish.” The methodology used to determine the index is similar to that used by The Conference Board to calculate consumer confidence measures. The survey was conducted from July to August 2004 with 245 businesses executives from across the state. The survey has a margin of error of +/- 5.9 percent. ### CBIA is the state’s largest business organization, with 10,000 member companies.
Editor’s Note: For a copy of the survey,
visit www.cbia.com/newsroom/surveys.
350 Church
Street · Hartford, CT 06103-1126 · cbia.com/newsroom
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