The economy has turned out better this year than Colorado business leaders expected, but they remain pessimistic due to high interest rates, inflation and trouble filling open jobs.
The latest Leeds Business Confidence Index released Thursday by the University of Colorado in Boulder marks the seventh consecutive survey indicating business leaders’ pessimism about the national and state economies.
A score of 50 is neutral, while marks below that signal negative outlooks. The overall confidence index fell to 43.6 heading into the fourth quarter of 2023, down from 44.1 in the third quarter.
But the outlook for the first quarter of 2024 brightened a bit to an overall level of 45.7.
“We heard from business leaders, a majority of them, about two-thirds, indicated the economy has outperformed their expectations so far in 2023,” said Brian Lewandowski, executive director of research at CU Boulder’s Leeds School of Business.
At the same time, Colorado business leaders continue to be bearish in their outlook toward the economy, he added.
Recent surveys showed that business leaders had expected a recession this year.
High interest rates appear to be “the overarching drag on optimism” at the national and state levels, said Richard Wobbekind, an associate dean and senior economist at CU Boulder.
Lewandowski said many of the economic indicators keep pointing to a growing economy. Nationally and in Colorado, consumer spending, the gross domestic product, personal incomes and employment continue to rise.
In August, Colorado’s labor force grew 2% year over year, hitting an all-time record of 3.25 million workers, Lewandowski said. Still, there are “a number of headwinds” that economists are watching closely, including high interest rates, inflation, energy prices and worker shortages.
Colorado business people ranked housing as the state’s most pressing challenge. Housing affordability and availability are problems across the state.
Worker shortages, inflation and interest rates were other major concerns cited. A total of 222 business leaders answered the survey Sept. 1-20.
The potential of the federal government shutting down, spurred by congressional fighting over funding, was mentioned just a couple of times, Lewandowski said.
The business confidence index looks at six areas to gauge opinions about economic trends: the state and national economies; industry sales, profits and hiring; and capital expenditures.
The results from the latest survey show that business leaders are most pessimistic about the national economy, giving it a score of 40.2 for the fourth quarter. The state economy got a 45.5 on the confidence scale, up from 44.9 in the third quarter.
Industry sales got the biggest vote of confidence, coming in at 48.2. The outlook for the first quarter of 2024 is up, but only slightly. All the numbers are still in the 40s, in negative territory.
“I do think a lot of people were anticipating, going into this year, a recession,” Wobbekind said. “I think they’re thinking if they can get through the fourth quarter, things will get better in the beginning of the new year.
“And I think some of that, honestly, is related to hope or expectations about interest rates and the economy,” he added.
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