Business confidence in Colorado is surging and has turned positive for the first time in two years as concerns over inflation and recession ease, according to the Leeds Business Confidence Index from the University of Colorado Boulder.
Looking ahead to the second and third quarters, the 178 panelists surveyed reported a positive outlook for the national economy, state economy, industry sales, profits, hiring plans, and capital expenditure. That hasn’t happened since mid-2022, when high inflation came to dominate the headlines.
“A year ago when we were talking about this report it was pretty negative,” said Richard Wobbekind, a senior economist at the Leeds School of Business during a press call Tuesday morning.
Wobbekind said he remembers thinking at the time that the data didn’t support the level of pessimism surveys were capturing and that business leaders should be more confident. Now that confidence has returned dramatically.
A score above 50 on the index indicates a positive outlook, while one below 50 a negative one. The overall index increased from 45.3 in the first quarter to 53.7 for the second quarter and 53 for the third. All six categories in the index increased year-over-year and entered positive territory.
When asked to explain their improved outlook, respondents cited general economic conditions, politics, including the upcoming election, and interest rates. Those topics were top of mind, both positive and negative, among respondents.
Colorado business leaders were more optimistic about the outlook for the Colorado economy, 54.1, than they were about the U.S. economy, 51, and having a more positive local outlook than a national one is typical.
They were most optimistic about industry sales, which had a top score of 57.9, and that might be what is driving a more confident outlook. Hope about the future comes easier when money is flowing through the door.
Business optimism can lead to higher spending and more hiring. The index for hiring plans went from 45.3 in the first quarter to 50.1 in the second and third quarters. That is just above neutral, but even when the index reading for hiring was contractionary last year, Colorado managed to add 72,700 jobs on an annual average.
With retirements in the state expected to run 30,000 to 40,000 workers a year, a lot of hiring needs to happen just to keep the workforce at its current level, said Brian Lewandowski, executive director of the Business Research Division at Leeds, which produces the confidence index.
Not to rain on the parade of renewed optimism, but Lewandowski cautioned that Colorado is not drawing workers from other states like it once did. Adults are already participating in the workforce at one of the highest rates in the country, so that won’t be a source of support.
Inflation isn’t gone completely, with consumer prices up 3.5% year-over-year in the Denver-Aurora-Lakewood area in January, according to the U.S. Bureau of Labor Statistics. It is expected to run above 3% this year, according to a separate forecast from CU Boulder’s Business Research Division.
Early last year, many economic forecasts predicted that higher interest rates from the Federal Reserve could tip the economy into a mild recession, but job growth held up, with Colorado adding 72,700 jobs in 2023, which represents a growth rate of 2.5%.
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