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For Immediate Release
ECONOMIC WOES HITTING NATIONAL CREDIT LENDING HARDER THAN CONNECTICUT'S
Connecticut businesses are starting to feel the negative effects of the national economic slowdown, but there are strong indications that the state is outperforming the national economy in key areas such as exports. Still, given the higher energy prices, weaker measures of consumer and business confidence, and the prospect of higher rates of inflation, there is legitimate concern about a full-blown national recession and the possibility of a downturn in business confidence, which would likely soften business lending in Connecticut in the coming months. Those are among the findings of the second-quarter Connecticut Business & Industry Association (CBIA)/TD Banknorth Credit Survey, released today. More than one in five businesses responding to the survey (23 percent) rated current credit conditions as either good or excellent. That's up one percentage point from the first quarter but down from 36 percent a year ago. Twenty-one percent expect conditions to worsen; that's down from 24 percent last quarter but up from 16 percent a year ago. “Expanding problems associated with the U.S. subprime mortgage crisis now appear to be spreading into Connecticut's credit markets, suggesting that business lending activity here may be adversely impacted in the months ahead,” said Peter Gioia, CBIA vice president and economist. Connecticut businesspeople are concerned about the possibility of a national recession affecting the state. But their responses about future credit conditions were more optimistic than expected, with more than half (53 percent) of businesses expecting credit conditions to remain stable over the next three months. Nearly one-third (30 percent) expect credit conditions to worsen over the same three-month period, but that's down from 34 percent last quarter. Nearly one-fifth (19 percent) expect conditions to improve, up from 18 percent last quarter and 6 percent a year ago. “Business expectations are important indicators of a state's economic strength, as is the ability of companies to obtain credit to secure future business investments,” said Michael T. Schweighoffer, Connecticut president, TD Banknorth. The CBIA/TD Banknorth Credit Availability index rose to 44 in the second quarter of 2008, representing a two-point increase over last quarter. While there appears to be concern about future credit conditions, that index rose slightly to 37. The current credit conditions index also rose slightly and is back above 50. (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 (52) and future expectations (37).
According to Don Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven, “Weakness within the national economy is clearly spilling over into the Connecticut economy, but all things considered, it seems that the state's economic health is holding up relatively well. The lower dollar is helping Connecticut exports grow at a double-digit pace, and that is significant. Not surprisingly, aggregate credit conditions are only seeing modest declines.” 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 late May and early June 2008. A total of 412 executives responded, for a 16 percent response rate and a margin of error of plus or minus 4.9 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. To arrange an interview with Peter Gioia, CBIA economist, or for more information, please contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com. For more information contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com. 350 Church
Street · Hartford, CT 06103-1126 · cbia.com/newsroom
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