Connecticut businesses maintained a cautious outlook through the first quarter of 2017 as the state's budget crisis continued to dominate the headlines.
The 2017 CBIA/Farmington Bank 1st Quarter Economic and Credit Availability Survey, released today, found 37% of business leaders expect improved conditions for their firms over the next three months, down from 40% the previous quarter.
Forty-seven percent expect stable conditions (compared with 39% in the fourth quarter of 2016) and 16% had a negative outlook, down from 21%.
About a quarter (26%) said they expect to increase their workforce, up from 24%, while 66% forecast no change (65%) and 8% plan reductions (11%).
"This survey shows that credit availability is on track to support economic growth, but businesses are still somewhat hesitant to invest, likely due—at least in part—to Connecticut's fiscal crisis," said CBIA economist Pete Gioia.
"It's still imperative that a solid, predictable state budget is adopted to rebuild the confidence for businesses to create investments that lead to jobs and economic growth.
"The two are intertwined."
The survey was emailed to businesses in late April and early May, as shrinking tax revenues saw the state's 2018-2019 budget deficit increase to more than $5 billion.
DataCore Partners economist and Farmington Bank adviser Don Klepper-Smith said he believes that businesses were adopting a "wait-and-see attitude" pending the outcome of the state budget.
He said the uncertainty over the budget was also reflected in the state's sluggish job growth, the slowest among the New England states over the last 12 months.
"Connecticut’s jobs recovery hit a soft patch in early 2017," Klepper-Smith said.
Further increases in state and local taxes will be counterproductive to economic growth in the long run.
Businesses were also asked about their investments in automation, including robots and kiosks.
Twenty-seven percent invested in automation in the last year, while almost one-third (30%) plan on making similar investments in the next 12 months.
"That reflects growing concern among businesses about the pattern of costly proposed workplace mandates introduced in the General Assembly," Gioia said.
"The good news is that the General Assembly has rejected new mandates this session."
Of those surveyed, 86% reported credit availability is not a problem for them and the majority (76%) characterized Connecticut’s current credit conditions as excellent, good, or average.
"Credit availability and financing needs should not be a concern to business leaders as they look to invest and grow here in Connecticut," said John J. Patrick Jr., Farmington Bank's chairman, president, and CEO.
"Banks are willing and able to help those companies in needs of financing to meet those goals."
This quarter, the Farmington Bank Credit Availability Index is 42, down from last quarter (47.2).
The survey also found:
- 30% of respondents used financing in the last three months (29% in the fourth quarter of 2016)
- 85% of those used bank loans and lines of credit to meet credit needs (86%)
- 86% were able to satisfy their borrowing needs (90%)
- 76% consider Connecticut’s lending climate to be average, good, or excellent (76%)
- 59% expect the lending climate to remain stable over the next three months (56%), 24% say it will be fair or poor (24%), and 16% believe it will be good or excellent (19%)