BREAKING NEWS: Colorado business index forecasts growth

Ernie Goss

A monthly index tracking business conditions in Colorado has advanced in part on increased manufacturing activity to continue to forecast growth in the months ahead.

The Business Conditions Index rose 1.6 points in February to 59.1. With gains in four out of the past five months, the index has climbed two points higher than this time last year. The latest reading remains nearly four points lower than the 62.9 posted in May, however.

“Nondurable goods manufacturers’ business activity bounced higher for the month. On the other hand, durable goods producers, including metal manufacturers, reported only tepid growth for the month,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

Goss calculates the Business Conditions 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 expanding economic conditions over the next three to six months.

In Colorado, the index advanced on higher component readings for new orders at 59.1 and production or sales at 60.1. The reading for employment fell nearly four points to 59.4.

  The combined Business Conditions Index for the mountain states rose

1.5 points in February to 62.8. At this time last year, the index stood at 59.5. The index has remained above growth-neutral 50 for 28 straight months.

“Even though growth has been especially strong for firms tied to energy and agriculture, our surveys indicate that growth has spilled over into a broad range of industries across the region,” Goss said.

The overall index for the mountain states reflected a higher component reading for employment at 61.2. Only 5 percent of supply managers responding to the survey upon which the February index was based expect layoffs in 2012, Goss said. “The labor market in the three-state region is clearly improving, with job opportunities expanding in both manufacturing and nonmanufacturing sectors.”

The reading for new orders slipped four-tenths to 59.6, while the reading for production or sales held steady at 67.4.

A component of the index measuring confidence among supply managers in the three states rose a half point to 58.3. “Despite higher energy and commodity prices, recent positive economic data on the national front have had clear and positive impacts on supply managers’ outlook,” Goss said.

Supply managers reported adding to inventories of raw materials and supplies for a 27th straight month, although the reading for inventories fell more than two points to 64.1.

The reading for prices paid, a measure of wholesale inflation, rose nearly a point to 74.8. “Given the excessive inflationary pressures we are tracking in our survey and vigorous economic growth expected in the months ahead, I think the Federal Reserve will have to violate their pledge to keep short-term interest rates at their current record lows until 2014,” Goss said.

The reading for exports from the mountain states region fell more than a point to 58.8, while the reading for imports rose more than three points to 58.1.

Federal monetary policy that keeps the U.S. dollar weak compared to foreign currencies will continue to push energy commodity prices higher, but also make U.S. goods more competitively priced and boost exports, Goss said.

“Exports continue to be an important source of growth for the region.

Additionally, an expanding regional economy has pushed firms to increase their purchases from abroad.”

In Utah, the Business Conditions Index advanced more than a point in February to 62.6 on higher component readings for new orders at 62.6 and employment at 59.1. The reading for production or sales fell more than four points to 65.4.

In  Wyoming, the Business Conditions Index surged more than six points to

67.5 on stronger component readings for production or sales at 77.4 and employment at 65.5. The reading for new orders fell more than six points to 55.8.