Colorado business index forecasts growth in 2012

A monthly index tracking business conditions in Colorado ended 2011 ahead of where it started, a gain that bodes well for economic and job growth in 2012.

Gross domestic product for the state is expected to grow an inflation-adjusted 3.3 percent in the coming year, while

Ernie Goss

payrolls should grow 1.5 percent, said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

According to the latest numbers from Goss, the Business Conditions Index rose more than three points in December to finish the year at 59.6. With gains in each of the last three months, the index has climbed to it highest level since reaching 62.9 in May. In January, the index stood at 54.9.

Goss calculates the Business Conditions Index for 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.

The overall reading for Colorado reflected higher component readings for new orders at 58.4 and employment at 61.6. The reading for production or sales fell to 58.7.

“Durable and nondurable goods producers in the state continue to report solid growth in sales and production. However, much of the growth has been achieved with increasing productivity and an expanding average hourly workweek,” Goss said. “Advanced manufacturing production activity has pushed overall state job growth into a healthy range.”

Projections for economic and job growth in 2012 exceed the estimated growth in 2011 of 3 percent in GDP and 1.1 percent in payrolls, Goss said.

The combined Business Conditions Index for the three mountain states advanced more than three points in December to 60.2, the highest level since the index stood at 61.2 in March. The index has remained above growth-neutral 50 for 26 straight months.

“Mountain states regional growth has significantly exceeded that of the national economy over the past several months,” Goss said. “Surveys of supply managers in the region and the U.S. indicate that the difference in terms of job and gross domestic product growth will expand in the first half of 2012. Firms tied to energy and international markets continue to report healthy growth.”

The overall index for the mountain states reflected higher component readings for new orders at 58.7, production or sales at 60.8 and employment at 58.7.

Goss said he expects payrolls in the three states to grow a combined 27,000 during the first half of 2012, although another 116,000 jobs will be needed before the regional work force returns to prerecession levels.

A component of the index measuring confidence among supply managers rose more than four points to 57.6. More than half of managers — 53.3 percent — responding to the surveys upon which the December index was based anticipate improving sales and business activity in 2012 compared to 2011. About a third of managers expect no change, Goss said.

Supply managers reported adding to inventories of raw materials and supplies for a 25th consecutive month, pushing up the reading for inventories more than 10 points to 66.

The reading for prices paid, a component of the index tracking wholesale inflation, rose nearly three points to 68.7. The latest reading remains below levels of a year ago, however, reflecting lower inflationary pressures overall.

In Utah, the Business Conditions Index advanced three points to 59.4 on higher readings for new orders at 59.2, production or sales at 62.8 and employment at 58.7. Goss forecasted GDP growth of 4.2 percent in Utah in 2012, with a 2.5 percent increase in payrolls.

In Wyoming, the Business Conditions Index rose nearly three points to 63.2 despite lower readings for new orders at 56.5 and employment at 53.8. The reading for production or sales climbed to to 55.3. Goss forecast GDP growth of 6.5 percent in Wyoming in 2012,with a 2.8 percent increase in payrolls.