Rising index forecasts improving prospects for Colorado

A monthly measure of business conditions in Colorado has jumped more than four points as prospects improve for growth in the first half of the new year.

“Recent surveys point to improving economic conditions for the first half of 2011, with industries with close ties to energy and agriculture pushing overall state growth higher,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

Goss calculates the Business Conditions Index for Colorado, which jumped more than four points in December to 58.1. With gains in each of the last three months, the index has climbed to its highest level since hitting 68.4 in June.

Goss calculates the index for the mountain states of Colorado, Utah and Wyoming based on the results of monthly surveys of supply managers in the three states. Readings range from 0 to 100. Readings above 50 forecast growth over the next three to six months.
In Colorado, the overall index reflected higher component readings of 73.3 for new orders, 73.4 for production or sales and 54.9 for employment.

The combined Business Conditions Index for the mountain states rose nearly two points to 57.6. The regional index, also at its highest level since June, has remained above growth-neutral 50 for 15 consecutive months.

“Regional firms with close ties to mining and durable goods manufacturing continue to report healthy and improving conditions,” Goss said. “The weak U.S. dollar and the expanding global economy will push regional growth for the first half of 2011 well above the same period for 2010.”

The regional index reflects higher readings for new orders at 63.2 and production or sales at 59.1. The reading for employment slipped to 56.4.

Goss said he expects job growth to accelerate to an annual pace of 1.5 percent for the first half of the year with mining and manufacturing tied to international markets leading the way. Goss said he expects more than 18,000 new jobs in Utah  during the first half of 2011 and 4,000 additional jobs in Wyoming.

Supply managers responding to the December survey were increasingly upbeat about the next six months, pushing the confidence index up nearly two points to 64.8. “While the overall U.S. economy remains weak as gauged by unemployment rates, individual firms in the mountain states region are experiencing solid improvements in business conditions,” Goss said. “This has translated into a strong economic outlook in terms of sales, but without accompanying rapid job creation thus far.”

Supply managers reported adding to inventories of raw materials and supplies for a 13th consecutive month, but at a slowing pace. The December reading for inventories slipped a half point to 50.6.

The reading for prices paid, a measure of wholesale inflation,  jumped more than three points to 71.2. The reading has remained above growth neutral for 18 of the past 19 months. Goss said he expects rising wholesale inflation to show up in higher consumer prices in 2011. “Likewise, I expect long-term interest rates to grow rapidly in the first half of 2011 to compensate investors for rising inflation.” he added.

The reading for new export orders climbed to 61.6 even as the reading for imports fell to 54.2. “The weaker U.S. dollar, making U.S. goods cheaper aboard and foreign goods more expensive in the U.S., is strengthening exports and slowing the growth in imports,” Goss said. “I expect this trend to continue in 2011 with the global economic rebound adding to the influence of the weaker dollar.”
In Utah, the Business Conditions Index rose more than a point to 57.4 on component readings of 62.4 for new orders, 60.1 for production or sales and 53 for employment.

In Wyoming, the Business Conditions Index advanced nearly three points to 57.2 on component readings of 63.2 for new orders, 49.9 for production or sales and 62.8 for employment.

Phil Castle is editor of the Grand Valley Business Times, a twice-monthly business journal published in Grand Junction. Castle brings to his duties nearly 30 years of experience in editorial management positions with Western Colorado newspapers. In addition, his free-lance work has appeared in a variety of publications, including the Washington Post. He holds a bachelor's degree in technical journalism from Colorado State University.
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Posted by on Jan 4 2011. Filed under Business News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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