Colorado business index seesaws back up

Ernie Goss

A monthly index tracking business conditions in Colorado has seesawed back up on reports of growth and increased hiring.

The Business Conditions Index advanced more than three points in October to climb to 56.7, forecasting continued growth in coming months.

The index has alternated between increases and decreases for the last six months in remaining in a narrow range between a low of 49.6 in July and a high of 59 in August. In October 2011, the index stood at 53.3.

“Nondurable goods producers are experiencing expanding business activity, while durable goods manufacturers reported somewhat slower growth,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

Goss calculate the Business Conditions Index for Colorado, Utah and Wyoming based on the results of monthly surveys of supply managers in the three mountain states. Readings range from 0 to 100. Readings above 50 signal expanding economic conditions over the next three to six months.

In Colorado, the overall reading reflected a more than 24-point  surge in the component reading for employment, which increased from 51.8 in September to 75.9 in October. Other component readings slipped, including new orders at 51.1 and production or sales at 54.

Colorado was the only one of the three mountain states in which the Business Conditions Index increased in October. The combined index for the three states dipped more than a point, but at 58.6 remained above growth-neutral 50 for a 36th consecutive month.

“Improvements in the housing sector and expansions linked to energy pushed the index into a healthy range for October,” Goss said. “Even so, the gains from energy for October were not as significant as in previous months.”

Goss said the mountain states continue to grow at a significantly faster pace than the United States.

For October, the overall index reflected lower component readings for new orders at 55.9 and production or sales at 66.5. The reading for employment edged down four-tenths to 57.6.

  “Over the last three months, employment growth in the region has remained healthy, but weakened slightly,” Goss said. “Annualized job growth over the next three to six months will be above 1 percent, but below pre-recession advances of more than 2 percent.”

A component of the Business Conditions Index tracking confidence among supply managers in the three states jumped more than six points to 56 in October. Goss attributed the gain to improvements in the housing sector and strong growth for energy linked firms.

Asked to gauge the likelihood of recession in 2013, however, 43 percent of supply managers responding to the survey said they think a recession is likely or very likely, while 14 percent believe a recession is unlikely. The remaining 43 percent rated the likelihood of a recession as a 50-50 proposition.

A component of the index tracking inventories slipped more than two points to 60.8, but reflected additions to raw materials and supplies for a 35th straight month. “Healthy inventory growth signals that supply managers expect production expansion in the months ahead and is consistent with economic optimism,” Goss said.

The reading for prices paid, a measure of wholesale inflation, edged up seven-tenths of a point to 71.8. Goss said he expects increases in the prices of raw materials and supplies to show up in higher consumer prices in the months ahead.

The reading for new export orders rose nearly two points to 58.3, while the reading for imports climbed more than a point to 58.7.

In Utah, the Business Conditions Index slipped nearly two points to 60.1 on component readings of 56.4 for new orders, 69.8 for production or sales and 56.6 for employment.

In Wyoming, the Business Conditions Index fell more than six points to 57.6 on component readings of 56.6 for new orders, 59 for production or sales and 58.6 for employment.