Connecticut’s credit conditions improved modestly in the July-September time frame, with gains posted in several key categories according to the Third Quarter 2012 CBIA/Farmington Bank Credit Availability Survey.

“It’s good to see marginal improvement—especially in future expectations—in the index,” CBIA economist Peter Gioia said today.

“However, despite record-low interest rates, demand remains rather tepid. This is important because a rise in credit demand usually precedes an uptick in economic growth.”

The Farmington Bank Credit Availability Index (FBCAI) was at 27.2 points in the third quarter, compared with 25.6 in the second quarter.

The third quarter index was considerably higher than the 16.9 recorded for the same period in 2011 and the fourth quarter 2011 measure of 22.5.

The FBCAI’s future expectations component, which measures credit availability three-to-six months from now, showed moderate improvement at 29.9 points, or three index points higher than the second quarter.

“Overall credit conditions remain in a primary upward trend and are demonstrating tangible improvement,” said John Patrick, president and CEO of Farmington Bank.”This is a welcome sign after two years of considerable volatility.”

More than half of respondents (51%) thought that future credit conditions would remain unchanged, while 14% said conditions would improve in the near-term. About 34% thought conditions would deteriorate in coming months, a marked change from the previous quarter, when 42% had a pessimistic outlook.

“Now that we’re past the election, I’m sure that the issues around economic growth, job expansion, and bottom-line profitability will move back to center stage,” said Don Klepper-Smith, chief economist and director of research at DataCorePartners.

Only 13% of survey respondents rated current conditions as either “good” or “excellent,” while 46% rated conditions as average. Forty-one percent said conditions were “poor” or “fair,” a slight improvement over the second quarter. Other findings:

  • 31% of respondents said they utilized financing in the third quarter.
  • 71% said credit availability was not a problem for their company.
  • Of those that looked for financing, 28% needed working capital for day-to-day operations while 13% wanted to finance machinery or equipment purchases.
  • For those unable to access credit, 58% said they were unable to grow or expand, while 19% reduced the size of their workforces.

The Third Quarter 2012 CBIA/ Farmington Bank Credit Availability Survey was emailed to approximately 1,900 Connecticut businesses in October of 2012. A total of 179 responded, for a 9.4% response rate and a margin of error of +/- 7.47%.