Phil Castle, The Business Times

Colorado business leaders are more upbeat heading into the second quarter, but remain concerned about higher interest rates and inflation.

Most believe a recession will begin this year, an expectation that could be motivated in part by recent bank collapses.

The Leeds Business Confidence Index rose 5.3 points for the second quarter. But at 45.1, the reading still reflects more negative than positive responses to the survey upon which the index is based.

The business research division of the Leeds School of Business at the University of Colorado at Boulder calculates the index. Rich Wobbekind, senior economist and faculty director of the division, said the latest results constitute a move in a more encouraging direction, but remain negative nonetheless.

While the overall reading moved up from what was tied for the fourth-lowest reading in the 20-year history of the index, that reading has remained below the neutral level of 50 for the third longest period.

Individual scores for all six of the metrics the index tracks increased between the first and second quarters. But only one score — for sales — topped 50.

Wobbekind said the national and state economies continue to grow, although at what could be a slowing pace. Employment continues to grow as well, but at a slowing pace with layoffs in the tech sector.

The 230 Colorado business leaders who responded to the survey upon which the second quarter index mentioned higher interest rates and inflation as the reasons for their outlooks — 38 percent of respondents cited interest rates and 31 percent inflation.

Inflation in the Denver, Aurora and Lakewood metropolitan area is projected to increase 4.3 percent this year, down from the 4.5 percent increase projected last quarter, Wobbekind said.

While 42.3 percent of respondents said they expected a recession to begin in the second of 2023, 15.3 percent expected a downturn in the first half of the year. Another 18.6 percent anticipated a recession in or after 2024.

The collapse of California-based Silicon Valley Bank and New York’s Signature Bank could have exerted effects on the national economic outlook, Wobbekind said.

Colorado continues to rank among the top states for personal income and the production of goods and services, he said. But the February labor estimates for Colorado were less heartening with only a 1.6 percent increase in nonfarm payrolls over the past year.

The individual score was lowest at 37.1 for expectations for the national economy despite a 2.7 point increase from the first quarter. While 10.9 percent of survey respondents predicted moderate or strong increases, 57.8 percent forecast moderate or strong decreases and 31.3 percent no change.

Expectations for the Colorado economy rose 4.6 points to 46.4 with 18.7 percent of respondents predicting increases and 32.1 percent decreases. At 49.1 percent, most anticipated no change.

The score was highest for expectations for sales with a 9.5-point increase to 50.4. For the second quarter, 34.8 percent of respondents predicted increases, while 33.1 percent anticipated decreases and 32.2 percent no change.

Expectations for profits rose 7.9 points to 47.6 with 27 percent predicting increases, 34.7 percent decreases and 38.3 percent no change.

Expectations for capital expenditures rose 2.7 points to 42.4 with 17.8 percent anticipating increases, 41.7 percent decreases and 40.4 percent no change.

Expectations for hiring increased 4.6 points to 46.7 with 26 percent predicting staffing increases, 34.8 percent layoffs and 39.1 percent no change.