Most business leaders in Connecticut believe their companies’ outlooks will remain stable or improve in the coming months, but more than half anticipate having to deal with higher interest rates by mid-2016, according to a survey out last week.
The vast majority of those polled, 82 percent, expect the Federal Reserve to raise the federal funds rate – which has been steady – by June 2016, according to the Third-Quarter Economic and Credit Availability Survey by the Connecticut Business & Industry Association and Farmington Bank.
The federal funds rate is the interest rate at which banks and credit unions trade balances held at the Federal Reserve with each other.
Forty-six percent of business leaders said an interest rate hike by the Fed would have a “very negative” or “somewhat negative” impact on their companies, while 50 percent said a rate increase would have no impact.
The survey was emailed to 1,500 business leaders statewide, of which 210 responded, in September and October.
Despite the looming threat of rising interest rates, some respondents showed optimism. About a third, 34 percent, said their outlooks for their firms are improving, the same as in the previous quarter.
But 48 percent expect their company outlooks to remain stable, down slightly from 52 percent in the second quarter. And 17 percent said their outlooks are “somewhat” or “significantly” worsening, the survey found, up from 13 percent in the second quarter.
“The economy is growing, however, the rate has been slow compared to our own long-term growth rate, and when compared to the U.S. average” Pete Gioia, CBIA’s vice president and economist, said in a statement. “Combined with the state’s fiscal situation, it’s clear we’re at a critical turning point and lawmakers need to make decisions that will encourage growth, not hinder it.”
Just 23 percent of those surveyed are hiring additional workers and 60 percent plan to keep their workforce level stable. But 16 percent expect to downsize in the coming months, up from 10 percent in the second quarter.
When it comes to credit, 31 percent of businesses had used it in the last three months, with most (58 percent) using it to pay for capital investment expenses, the survey found. Capital investments most often were to improve production or sales, cut operational costs and invest in technology.
“As businesses become more confident about their future in Connecticut, banks are ready with credit financing to help them expand, whether it’s through innovative new products or capital investments,” Farmington Bank CEO and President John Patrick Jr. said in a statement.