State Credit Conditions Sustaining Despite Subprime Debacle

HARTFORD — Despite the growing national subprime mortgage crisis, Connecticut business executives say the lending market in Connecticut is holding up surprisingly well and financing is available to help their businesses grow.

According to the fourth-quarter 2007 CBIA/TD Banknorth Credit Availability Index and Survey, released December 18, respondents believe that credit conditions are not problematic right now, but they have concerns about future lending conditions.

The CBIA/TD Banknorth Total Credit Availability Index, which indicates the health of the state’s credit markets and measures the quality of current credit conditions across the state, had a reading of 58 in this survey, the highest rating and first time it has gone above 50 in a year. A reading above 50 indicates improvement in credit conditions, while readings below 50 indicate deterioration. The Total Credit Availability Index is a composite measurement of current credit availability (69) and future expectations (46).

“The results show a rebound from the weaker readings in the last survey, and signal that financing is readily available,” said TD Banknorth President John Patrick. “This is in sharp contrast to what the local residential market is experiencing, with credit conditions becoming increasingly problematic due to the subprime mortgage crisis, which continues to spread.”

The survey found that nearly a quarter (22 percent) of respondents expect credit conditions in Connecticut to improve over the next three months. That is the highest percentage in over a year.

“Lower interest rates and the falling dollar have made Connecticut exports more affordable for overseas buyers, helping state exports grow at double-digit rates in recent months,” said Peter Gioia, CBIA vice president and economist. “There is ample credit available for businesses, translating into both increased business growth and overall economic activity.”

But expectations for future conditions, while stronger than in the third quarter of 2007, are still causing some concern. Nearly a quarter (24 percent) of respondents expect conditions to deteriorate, down from 37 percent in the third quarter of 2007.

“Given the evolving weakness in the domestic economy, there is legitimate concern about the future lending environment, especially for the first half of 2008,” said Donald Klepper-Smith, chief economist and director of research for DataCore Partners.

The survey was conducted by CBIA and Mr Klepper-Smith and sponsored by TD Banknorth. The methodology used to determine the index is similar to that used by The Conference Board to calculate consumer confidence measures. The survey was conducted in November, with 278 executives responding. The survey has a margin of error of plus or minus 6 percent.