Connecticut businesses still reported difficulties obtaining credit in the third quarter, according to a new survey, with nearly a third stating they had problems securing loans.
The Connecticut Business and Industry Association (CBIA) surveyed nearly 350 businesses in September and attached a margin of error of plus or minus 5 percent to the results. The survey was co-sponsored by TD Bank.
The CBIA/TD Bank Total Credit Availability Index hit a five-year low in the third quarter at 11.8, with a score of 50 the dividing line between optimism and pessimism. The index measures both current credit conditions and expectations for conditions three to six months out.
Only 7 percent of those surveyed expect conditions to improve over the next three months, while 46 percent expect credit conditions to deteriorate further through year”™s end.
Peter Gioia, economist and vice president for CBIA, said businesses that are receiving financing are not getting all the capital they need.
“The problem is particularly acute for firms seeking more than $100,000,” Gioia said in a statement. “If businesses received the capital they need, we”™d see more investment in new plants and equipment, and that would help expand operations and create jobs.”
A separate survey last month by the National Federation of Independent Business suggested loan demand remains weak due to widespread postponement of investment in inventories, and record low plans for capital spending.
“In an economic environment that is still risk-averse, we must find new ways to extend credit to Connecticut companies in order to promote growth, which will help drive economic recovery,” said Don Klepper-Smith, chief economist and director of research at DataCore Partners in New Haven. “Our expansion is certainly apt to be short-lived if credit conditions remain where they are.”
The Federal Reserve Bank of New York reported similar results from a survey of business sentiments in the tri-state area the past two months. Bankers in the area reported rising delinquency rates ”“ particularly for consumer loans and commercial mortgages ”“ along with ongoing tightening in credit standards. Loan demand continued to decline, except for residential mortgages where bankers report some pickup in demand.
Ominously, one major employment agency specializing in office jobs has seen a renewed softening in recent weeks, according to the Fed. There is said to be only scattered hiring at financial institutions, and activity has virtually ground to a halt in the legal and publishing industries.
Despite renewed hiring by some hedge funds in the recent market run up, the Fed indicated financial sector jobs continue to slide overall, albeit at a more subdued pace from the first half of 2009. Compensation is down sharply and should continue to fall heading into 2010, particularly for top earners in the industry.
The Federal Reserve Bank of Boston, whose territory includes every county in Connecticut except Fairfield County, said some commercial landlords report having cut office rents as far as they can. The Fed added that a few noteworthy office building sales in Boston could signal renewed investor confidence, while facilitating other deals by providing a pricing comparison.
Connecticut has lost more than 86,000 jobs since the onset of the recession.
