Colorado business index edges up

Ernie Goss

A monthly index tracking business conditions in Colorado has edged up as gains in the manufacturing and construction sectors more than offset declines in the energy sector. The Business Conditions Index advanced six-tenths of a point to 54.4 in January and continues to signal growth in the months ahead.

“Both durable and nondurable goods expanded at a solid pace for January and more than offset downturns in the state’s energy sector. The state’s construction industry continues to rebound, adding jobs at a positive pace,” 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.

Reading above 50 forecasts expanding economic conditions over the next three to six months.

In Colorado, the gain in the index in January reversed two months of declines. The latest reading remains below the 57.5 posted for January 2012, however.

The overall reading for January 2013 reflected higher component readings for new orders at 53.3 and employment at 51.2. The reading for production or sales slipped to 49.3. The combined Business Conditions Index for the three mountain states advanced four-tenths of a point to 54.8 in January and portends growth, Goss said.

“Based on our survey results over the past several months, I expect both overall job and economic growth to continue on a positive trend and exceed that of the nation for the fist half of 2013,” he said.
The overall reading reflected a lower component reading for production or sales at 56, while the reading for new orders remained unchanged at 49.9. The reading for employment rebounded back above growth-neutral 50 to 53.6. “Expansions among durable and nondurable goods manufacturers more than offset pullbacks in the region’s large energy sector,” Goss said.

At the same time, though, a component of the index tracking confidence among supply managers in the mountain states slumped more than five points to 52.1. “Washington, D.C., political uncertainty weighed on confidence even as an improving housing sector boosted supply managers’ economic outlook,” Goss said.

A component of the index tracking inventories of raw materials and supplies retreated more than a point, but at 63.1 reflected growth for a 38th consecutive month. “Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth and expanding business confidence,” Goss said.

The reading for prices paid, a measure of wholesale inflation, edged up six-tenths of a point to 69.8. While inflationary pressure has yet to increase significantly, Goss said the latest survey results indicate that it could. Supply managers responding to the latest surveys said they expect average wholesale prices to increase over the next six months at an annual rate of 5.8 percent.

The reading for new export orders rose four points to 56.6 in January, while the reading for imports sank more than two points to 55.4.
In Utah, the Business Conditions Index increased more than three points to 57.3 on stronger component readings for production or sales at 57.3 and employment at 56.8. The reading for new orders fell to 51.8.

In Wyoming, the Business Conditions Index retreated nearly two points to 53.8, but remained above growth-neutral 50 for a 39th straight month. Component readings actually trended higher for new orders at 45.5, production or sales at 60.5 and employment at 52.7. Readings dropped for delivery time and inventories.