First Quarter 2012 Credit Availability Survey


Connecticut’s credit conditions are showing signs of improvement according to the First Quarter 2012 CBIA/Farmington Bank Credit Availability Survey, with the credit availability index rising more than five index points to 28.5, the best number since fourth quarter of 2010 when the index was at 31.5.

“The national economic recovery is three years old as of mid-2012,” says John Patrick, president and CEO of Farmington Bank. “Going forward, credit availability will assist area businesses with the funding of day-to-day operations, payroll obligations, capital investments, maintaining sufficient levels of inventories, and future plans for expansion.”

Economists have long argued that credit availability is crucial to sustained economic growth and therefore is expected to play a pivotal role in the strength of expansion going forward for the balance of 2012 and into 2013.

“Economic recovery so far has lagged prior expansions,” says Peter Gioia, economist for CBIA. “We still have challenges regarding job growth despite the fact that state and regional unemployment rates are declining.

“The new data reflects a consensus view that credit conditions are ‘improving modestly’ for many area businesses but have yet to recover to a point that could be deemed ‘strongly positive in the aggregate.’”

Don Klepper-Smith, chief economist and director of research at DataCorePartners, adds that, “Credit availability is crucial to the strength of economic recovery. Ample credit means sufficient staffing for many area firms, adequate inventories on-hand for future sales, and needed capital for future expansion.

“Heading into the second half of 2012, we see we’re on a path of continued economic growth. Sustaining momentum will be important to economic recovery heading into 2013, when the primary risks to recovery may be a bit more pronounced. Overall, I’m encouraged.”

The first quarter 2012 survey showed that 41% of all businesses polled expect the outlook for their individual firms to improve over the next three months, while 34% anticipate better economic performance nationally over the next quarter.

Other findings:

  • Fourteen percent of respondents saw future credit conditions improving over the near-term, while 52% thought that future credit conditions would remain effectively unchanged. About one-third of respondents (34%) were of the opinion that near-term credit conditions are likely to deteriorate in coming months.
  • Fifteen percent of respondents rated current conditions as either “good” or “excellent,” while 47% rated current credit conditions as being “average.” About 38% stated that correct credit conditions were either “poor” or “fair.”
  • When asked about types of financing their firms needed most, about one-third (30%) of respondents stated they needed working capital for day-to-day operations, while another 11% said that the capital was needed for machinery and equipment purchases.
  • Forty-two percent of respondents stated they would use available credit by investing in new equipment, while another 19% sated they would use the credit to expand into new stores, branches, and operations. About 14% of respondents said they would use the funds to maintain their current workforce, and 25% reported that they would be adding workers if funds were available.
  • Seventy-six percent of respondents stated that credit availability had not been problematic for their businesses, while just 24% stated that credit availability was a problem.

“This is an improved credit outlook by Connecticut CEO’s, and we expect to see their ability in maintaining margins over the next year to result in more hiring,” says Marie O’Brien, President of the Connecticut Development Authority.

The First Quarter 2012 CBIA/ Farmington Bank Credit Availability Survey was emailed to 1,965 Connecticut businesses in April of 2012. A total of 12.5% executives responded, for a margin of error of 95% confidence at +/-6.3%.



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