Colorado business index retreats, but still forecasts growth
A monthly index tracking business conditions in Colorado has retreated from a two-year high, but continues to forecast growth in the months ahead.
The Business Conditions Index slipped to 58.7 in June, down more than four points from a reading in May that at 62.8 was the highest since May 2011.
The latest results reflect declining performance in the energy sector, but continued strong performance from the construction sector, said Ernie Goss, director of the Goss Institute for Economic Research in Denver.
“The increase in the value of the U.S. dollar and the global economic slowdown have resulted in pullbacks in the state’s energy sector. The state’s construction sector, on the other hand, continues to expand at a very healthy pace, positively affecting both manufacturing and nonmanufacturing firms in the state. Durable goods manufacturers, including metal producers, are experiencing a slowdown in recent growth,” Goss said.
Goss calculates the Business Conditions Index for Colorado, Utah and Wyoming based on the results of monthly surveys of supply managers in the three mountain states. The index ranges from 0 to 100. Readings above 50 forecast expanding conditions over the next three to six months.
In Colorado, the overall reading reflected lower component readings for new orders at 54.3, production or sales at 49.2 and employment at 52.5.
The combined Business Conditions Index for the mountain states fell to 58.6 in June, down more than two points from a reading in May that at 61 was the highest since October.
“Declines in business activity for the region’s large energy sector were more than offset by expansions among durable and nondurable goods manufacturers, particularly those linked to the region’s rapidly expanding construction industry,” Goss said.
“A 5 percent increase in the value of the U.S. dollar for 2013 has been an important factor slowing industries producing commodities sold in international markets,” Goss added. “I expect past surging growth to slow in the months ahead.”
The overall mountain states reading reflected lower component readings for new orders at 57, production or sales at 55.3 and employment at 52.3.
“Even though the index fell for the month, companies in the region continue to add jobs at a much faster pace than businesses in other parts of the nation,” Goss said. “The region is now adding jobs at roughly twice the rate as the U.S. Our regional survey and national surveys of supply managers indicate that this gap is likely to remain for the next three to six months, with the region adding jobs at an annual pace of 2 percent and down from the 3 percent pace recorded in the first half of 2013.”
A component of the Business Conditions Index tracking confidence among supply managers in the mountain states fell nearly seven points to 54.3.
“The rapid upturn in interest rates pushed supply managers’ economic outlook lower. Furthermore, the federal spending sequestration is having a slightly larger impact on supply managers’ economic outlook,” Goss said.
A component of the index tracking inventories of raw materials and supplies increased more than two points to 67.7 for a 43rd consecutive month of gains.
The reading for prices paid for raw materials and supplies, a measure of wholesale inflation, declined nearly four points to 55.9. “Not only is wholesale inflation tame, it is headed lower,” Goss said.
The reading for new export orders fell nearly four points to 53.6, while the reading for imports sank more than three points to 53.1.
In Utah, the Business Conditions Index retreated 2.5 points to 57.4 on lower component readings for new orders at 58.8, production or sales at 59.1 and employment at 51.8.
In Wyoming, the Business Conditions Index fell 5.5 points to 62.3 on lower component readings for new orders at 64.7, production or sales at 58.4 and employment at 55.4.