2016 recession? Not likely, says economist

There has been a notably rocky start to 2016 in financial circles ”“ China”™s stock market and oil prices tanking in tandem ”“ but a leading economist with the state”™s largest business organization cautions that rumors of a pending 2016 recession are exaggerated.

“The sky is not falling,” wrote Connecticut Business and Industry Association vice president and economist, Pete Gioia in his Jan. 28 report.

“Yes, Moody”™s has upped the probability that our economy will fall into a recession over the next six months, raising the risk from 13 percent (in November) to 16 percent (in December),” he said. “Hardly cause for alarm.”

Contrary to headlines amplifying a chorus of recession fears, Gioia predicts the U.S. economy will grow at a rate of 2.5 percent this year, with no recession.

“It is far likelier,” he said. “While there are definite losers in the economy ”“ think oil producers in the central United States ”“ by and large, Main Street and consumers are doing just fine. Credit is abundant, and there”™s moderate growth in jobs and in the housing market.”

However, he cautions that China”™s economic woes warrant vigilance, particularly if the country”™s decline continues.

Homing in on the Fairfield County economy, Chris Bruhl, president and CEO of the Business Council of Fairfield County, said reports of a looming recession, particularly regarding a downturn in the wake of General Electric”™s plans to relocate their headquarters out of the county, are greatly exaggerated.

“Connecticut is a state that has continuously readapted its economy over several centuries,” Bruhl said. “It may take us a while to wake up to the urgency of change, but we always have.”

One of the biggest challenges facing the county in 2016 will be making sure its companies have the talent to meet the growing demand for digital expertise, he said.

Bruhl cited companies such as New Oak Capital, Indeed and the county”™s newest unicorn (a company valued at more than $1 billion) Datto, all of which have opened offices in Fairfield County in recent years as they have expanded.

“These three companies that are going to need 350 highly paid, digital workers of all kinds from big data to coders,” he said. “We are seeing transition ”“ a rebalancing ”“ that will lead to growth, but it is not going to be explosive growth in 2016.”

While opportunity abounds, Bruhl said Gioia is correct in his caution of economic headwinds concerning China and volatility in global oil markets.

“We are not going to have four percent growth, but between two and three sounds completely reasonable,” Bruhl said.

Gioia”™s forecast follows the 2015 CBIA/Farmington Bank 4th Quarter Economic and Credit Availability Survey, which found almost 90 percent of Connecticut business leaders anticipate continued modest growth in their businesses this year.

Shadowing Gioia”™s assertions on credit availability, the report found 87 percent of respondents reported being able to satisfy all their borrowing needs, up from 79 percent last quarter. Also, more than a quarter (27 percent) reported their business using earnings to finance operations, up from 11 percent last quarter.

“These are some of the most encouraging signs that the economy is turning around,” said Gioia. “They are significant because investment, the ability to get and meet capital needs, sustains that expected employment boost.”

The CBIA reports the survey also found:

• 62 percent of respondents are making capital investments, mainly to improve production or sales, trim operational costs, and invest in technology.
• 83 percent report credit availability is not a problem; 94 percent have had no changes in lending terms.
• 31 percent describe the Connecticut lending climate as good or excellent, while 50 percent consider it average.
• 94 percent were able to fully or partially meet borrowing needs over the last three months.
• 69 percent own their firm”™s building or real estate in Connecticut.

The Farmington Bank Credit Availability Index, which speaks to the health of Connecticut”™s credit markets, also showed improvement this quarter in current conditions and future expectations with a rating of 64.2, up from 61.1 last quarter.

This story has been updated.