Colorado business index seesaws down

Ernie Goss

A monthly index tracking business conditions in Colorado continues to seesaw, with the latest reading slipping on reported declines in new orders, sales and employment. What hasn’t changed is the  forecast for growth in the months ahead.

The Business Conditions Index fell nearly two points in November to 54.9.  The index has alternated between increases and decreases for seven months in remaining in a nearly 10-point band between 49.6 and 59. In November 2011, the index stood at 56.2.

Even with the latest decline, the index remains above 50, signaling expanding economic conditions over the next three to six months.

“Expanding business growth was reported across a broad range of industries in the state, including mining, durable goods manufacturing and nondurable goods manufacturing,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver. “Furthermore, an advancing construction industry is having positive impacts on firms linked to this industry.”

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.

In Colorado, the overall reading reflected lower component readings for new orders at 42.2, production or sales at 51.5 and employment at 71.3.

The Business Conditions Index also declined for Utah and Wyoming in November. The combined Business Conditions Index for the three mountain states slid nearly three points to 55.9.

“Our regional survey results over the past several months, compared to national surveys, indicate that the regional economy will continue to outperform the national economy,” Goss said. “Even so, regional growth over the next three to six months will slow, but remain positive.”

For November, the overall Business Conditions Index for the mountain state reflected lower component readings for new orders at 53.9, production or sales at 60.2 and employment at 52.1.

“Surveys indicate that business growth will slow, with job growth declining, but remaining positive over the next three to six months,” Goss said.

A component of the Business Conditions Index tracking confidence among supply managers in the three states tumbled more than seven points in November to 48.9. “Both the fiscal cliff and the uncertainty surrounding health care reform were reported by supply managers as negatively affecting their economic outlook,” Goss said.

At the same time, though, a component of the index tracking inventories or raw materials and supplies rose nearly two points to 62.4 for a 36th consecutive month of increases. “Healthy inventory growth normally signals that supply managers expect production expansions in the months ahead and is consistent with economic growth,” Goss said.

The reading for prices paid, a measure of wholesale inflation, dipped more than two points to 69.7. “Weaker commodity prices, such as those for oil and copper, linked to slower global growth are showing up in our survey,” Goss said. “However, I expect the Federal Reserve’s easy money policy to continue to support elevated commodity prices even with the global economic slowdown.”

Supply managers responding to the surveys upon which the November index was based projected an average 2.9 percent increase over the next six months in prices for the products they purchase.

The reading for new export orders fell more than a point to 57.1 in November, while the reading for imports rose more than four points to 62.3.

In Utah, the Business Conditions Index retreated nearly three points to 57.3 on component readings of 57.1 for new orders, 65.2 for production or sales and 49.9 for employment.

In Wyoming, the Business Conditions Index fell nearly three points to 55.9 on component readings of 53.3 for new orders, 54.5 for production or sales and 53.2 for employment.