Business confidence in both the U.S. and Connecticut economies slumped in the fourth quarter of 2012, according to a new survey released today.

CBIA's Quarterly Economic Survey: Fourth Quarter 2012 found that more than half (52%) of surveyed business leaders expect the state’s economy to worsen in 2013.

That represents an increase of eight percentage points over the previous quarter. Just 14% thought the state economy would improve, while 34% believed conditions would remain stable.

Expectations for the national economy also dipped, with 40% of those surveyed responding pessimistically, compared with 36% last quarter. About one-quarter (24%) felt conditions would improve.

Fiscal cliff concerns

CBIA economist Pete Gioia said the timing of the survey, which was in the field in January, likely influenced responses.

“There’s a lot of uncertainty out there, driven in part by Washington’s failure to fully resolve the fiscal cliff issues and the ongoing threats to defense spending,” Gioia said.

“These results show a lack of confidence in an economy that’s really stuck in neutral.”

Short-lived reboumd

The survey showed remarkably similar results to the two prior quarters, with most differences within the margin of error of the survey. Some important responses include:

  • 34% of respondents expect increases in production and sales, with 21% seeing decreases, the best numbers in the survey.
  • 18% see their work force expanding, while 19% expect to shed positions over the next quarter.
  • 27% see an improved outlook for their firm against 22% who see conditions declining.
  • For their industry, 23% see improving conditions while 28% see declines.

“In each case these numbers show an economy with a long way to go to reach sustainability,” Gioia said.

The third quarter rebound in business confidence--recovering from record low optimism in the April-June 2012 survey--was short-lived.

Turn for the worse

And the outlook has taken a decided turn for the worse since the fourth quarter of 2011, when two-thirds saw improving or stable conditions in the state and 81% forecast the same for the U.S. economy.

Based on the state Department of Labor’s latest figures, Connecticut lost 1,800 jobs in December, finishing the year with a net loss of 100 jobs.

The unemployment rate fell three-tenths of a point to 8.6%, which Gioia said represented “more people leaving the labor force because they were discouraged.”

CBIA’s Quarterly Economic Survey: Fourth Quarter 2012 was emailed to approximately 1,900 Connecticut businesses in January of 2013. A total of 187 responded, for a 10.2% response rate and a margin of error of +/- 7.3%.