Despite Uncertainty And National Downturn, Experts Positive On CT’s Economy

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With a volatile international environment due to the war in Iran, Connecticut’s citizens, along with the rest of the nation, are experiencing the shock of higher gas and oil prices, but experts say that a recession isn’t on the horizon just yet.

Meanwhile, numbers released today show Connecticut is demonstrating economic success despite a downturn nationally.

As last year’s fourth quarter drew to a close, the country’s real GDP (Gross Domestic Product –  the total market value of all final goods and services produced in the country), increased at an annual rate of 0.5 percent, according to a report released today by the U.S. Bureau of Economic Analysis. The third quarter had shown that the real GDP had an increase of 4.4 percent.

Chris DiPentima, president and CEO of the Connecticut Business and Industry Association (CBIA) – the state’s largest business organization – said the report highlights many positives about Connecticut.

“This report highlights the resilience of Connecticut’s economy despite a significant slowdown in the fourth quarter,” DiPentima said in a statement. “While GDP growth slowed to 0.5% in the fourth quarter, Connecticut’s economy expanded 2.4% in 2025 — 12th best among all states. It’s encouraging to see key industries like transportation and warehousing, professional services, and durable goods manufacturing driving overall growth in 2025.”  

He added that the state’s personal income grew 4.4%. 

However, DiPentima also warned that there is still an uphill battle. 

“This must serve as a reminder to state lawmakers that the policies they adopt this session must offset the growing uncertainty and volatility at the federal level. Labor force challenges and rising costs — from energy to healthcare—remain key barriers to growth, especially for small businesses,” DiPentima said. “For Connecticut to build on the momentum from 2025, it’s critical that we focus on policies that support business and make it more affordable for employers to innovate and invest in their companies and employees.” 

State leaders have been eyeing the economy closely, particularly with events going on in the Middle East, with the U.S. war with Iran. 

FILE PHOTO — Comptroller Sean Scanlon speaks about mental health for students at a discussion at Farmington High School on May 5, 2025. Credit: Jamil Ragland / CTNewsJunkie

An April 1 report issued by state Comptroller Sean Scanlon reported that while the recession risk did increase in March, “most economists still expect to avoid a recession in the U.S. economy in 2026, as long as the hostilities end soon, but it also depends how long benchmark oil prices remain above $100 per barrel.” 

According to the economic report issued by Governor Ned Lamont’s office in February, the state accounted for the consumption of 1.5 billion gallons of gasoline consumption in 2023, 1.1% of the country’s total consumption of 141.8 billion gallons. 

With the prices of gas up at least $1 a gallon, that is going to be felt through the economy as families have less to spend, according to Steven Lanza,  associate professor in residence at UConn’s Department of Economics.

FILE PHOTO — UConn Professor Steven Lanza

“You can think of that as sort of a tax on consumer spending. So they have a dollar less to spend, so that’s going to kind of multiply through the economy in a sense. It’s sort of the opposite of – if you get an influx of money and you go and spend it, then that creates income for other people in the economy, and then they turn around and spend that money too,” Lanza said. “And so the initial dollar has a multiplier kind of effect. An extra dollar generates more than a dollar’s worth of economic activity because of that spending and re-spending. Well, it works in reverse too.”

Then there is the direct impact on consumers – such as the impact of heating oil, although the temperatures are starting to get warmer, Lanza said.

“So maybe by the time we’re back into it, this thing will be resolved,” Lanza said, referring to the war in Iran. “But if not – and I know we got a delivery about a week ago, and the price was just over $5.”

Those kinds of prices will lead people to not spend elsewhere, Lanza said. 

But while it does have those types of impacts, it will not itself lead the state into a recession, Lanza said. 

“It’s going to certainly keep growth kind of subdued if it were to continue for the course of the year,” he said. “It would probably have a noticeable impact on – if state GDP was going to grow 2% or 3%, it’s going to grow 1% or 2% instead, kind of thing.”

According to the April 9 report on the AAA website, Connecticut’s average gas price per gallon is $4.111, compared to the national average of $4.166. A year ago, the average was $3.082. A month ago, it was $3.367. 

Scanlon’s report also pointed out that elevated uncertainty and higher operating costs are likely to slow businesses’ hiring and investment.

“These forces may cancel out the expected boost to growth in 2026 from higher average tax returns and business tax breaks from the One Big Beautiful Bill Act,” according to the report.

Meanwhile, members of the state legislature are working on ways to help alleviate the burden here in Connecticut. 

Peter Myers, senior policy director at the CBIA, said members of that organization were pleased with the legislature taking up Senate Bill 2, An Act Supporting Local Commerce.

The bill, which passed the Finance, Revenue and Bonding Committee 50-3, would exempt from the sales and use taxes gas and electricity used by certain commercial and industrial businesses and dedicate revenue generated from the additional 1% of the sales tax on meals – 50% to the Tourism Fund and 50% to municipalities to which the purchases of the meals are sourced.

Around 90% of the businesses the CBIA represents are small businesses with less than 100 employees, Myers said.

“The small businesses of our state are the backbone of every community,” Myers said. “They are facing the affordability crisis around energy every day and SB 2 will help to provide them some immediate relief.”