Colorado index slips, but still signals growth

Ernie Goss

A monthly index tracking business conditions in Colorado has slipped, but continues to forecast growth in part on the resurgence of the construction industry.

“The turnaround in the state’s construction industry has been an important and positive driver of the economy,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

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. Readings range from 0 to 100. Readings above 50 forecast an expanding economy over the next three to six months.

In Colorado, the Business Conditions Index retreated nearly three points in April, but at 58.2 continues to signal growth.

The overall reading reflected slightly lower component readings of 55.8 for new orders and 55.6 for production or sales. The reading for employment, however jumped more than five points to 59.9.

“Colorado has now regained all of the jobs lost during the national recession,” Goss said. “Furthermore, the state is adding jobs at approximately twice the pace of the nation. Our surveys over the past several months indicate that this favorable gap for Colorado will continue for the next three to six months.”

The Business Conditions Index for the mountain states climbed more than two points in April to 58.3. With gains in each of the last four months, the index has climbed to its highest level since October. The index was higher still at 58.8 in April 2012.

“Companies with close ties to housing and agriculture are benefiting from the rebound in housing and the expansion in the agricultural sector,” Goss said.

The overall reading for the mountain states reflected higher component readings at 58.9 for new orders and 57.3 for production or sales.

The reading for employment fell more than a point, but at 56.2 continues to forecast growth, Goss said. “The region is now adding jobs at almost three times the pace of the U.S. Durable and nondurable manufacturers as well as valued-added services, such as engineering services, are stepping up their hiring. Our surveys indicate that this trend will continue for at least the next three to six months.”

A component of the index tracking confidence among supply managers in the three states jumped more than four points to 58.2. “Supply managers expect the upturn in housing to remain an important ingredient of the economic expansion,” Goss said. “The federal spending sequestration is having little impact on the regional economy or the outlook.”

About 70 percent of the managers responding to the surveys upon which the April index was based said federal spending cuts have yet to affect their companies. Another 25 percent reported modest effects, while 5 percent reported significant effects.

Asked about the implementation of federal health care law, 55 percent of managers said they have experienced, or expect to experience, negative effects. Another 40 percent anticipate no effects.

  The reading for inventories of raw materials and supplies climbed five points to 65.6, signalling growth in inventories for 41 straight months.

The reading for prices paid, a measure of wholesale inflation, dropped nearly two points to 65.7. While inflationary pressures remain low, Goss said he remains concerned about the effects of rising land prices on the agriculture industry.

The reading for new export orders retreated more than two points to 52.1, while the reading for imports edged up a half point to 57.9.

In Utah, the Business Conditions Index advanced 4.5 points to 57.8 on higher component readings of 58.4 for new orders, 59 for production or sales and 55.9 for employment.

In Wyoming, the Business Conditions Index jumped nearly four points to 64.2 despite lower component readings of 61.9 for new orders, 53.2 for production or sales and 55.1 for employment.