Colorado business index seesaws down

Ernie Goss

A monthly measure of business conditions in Colorado continued a seesaw trend in June with a more than eight-point retreat to its lowest level this year.

While the Business Conditions Index has vacillated between gains and losses for the past four months, the outlook for at least one component of the index appears more promising.

“Based on our surveys, I expect the state to continue to add jobs at a healthy pace with an employment increase of more than 18,000, or 0.8 percent, for the rest of 2011,” 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. The index ranges from 0 to 100, with readings above 50 forecasting expanding conditions for the next three to six months.

In Colorado, the Business Conditions Index dropped 8.5 points in June to 54.4, the lowest reading since November. The drop followed a more than nine-point gain in May that pushed the index to its highest level in nearly a year.

The latest decline reflected lower component readings for new orders at 66 and production or sales at 52.2. The reading for employment, however, rose eight-tenths to 59.2.

Since bottoming out in January 2010, the Colorado economy has added about 24,000 jobs for a 1.1 percent gain, Goss said. He expects job growth to continue through 2011.

The combined Business Conditions Index for the mountain states advanced nine-tenths in June to 58.4. The index has forecast growth for 20 consecutive months.

“A high share of businesses in the region report improving economic conditions,” Goss said. “Energy firms, as in past months, are benefiting from elevated energy commodity prices.”

The index reflected mixed component readings with a decrease in new orders at 63, but increases for production or sales at 59.8 as well as employment at 57.6.

The three-state region has added nearly 60,000 jobs since January 2010 for a 1.6 percent gain, Goss said. That trend should continue through 2011 with the addition of another 46,000 jobs, he said. “Firms selling internationally will be prime beneficiaries of the continuing expansion.”

Nonetheless, the reading for business confidence fell nearly eight points in June to 52.1 “Elevated energy prices combined with uncertainty surrounding the national economy and U.S. debt situation served to puncture business confidence for the month,” Goss said.

The reading for the prices of raw materials and supplies — a measure of wholesale inflation — retreated more than eight points in June, but at 77.1 still signals inflation. Goss said short-term strengthening in the U.S. dollar will help curb inflation, but he expects the dollar to weaken in the fourth quarter of 2011 and inflation to remain a problem for the remainder of 2012.

Supply managers reported adding to inventories of raw materials and supplies in June, pushing the reading for inventories up nearly three points to 56.8. Inventories have expanded for 19 straight months.

The reading for regional export orders tumbled more than 14 points to 50, while the reading for imports remained unchanged at 50.

In Utah, the Business Conditions Index edged downward four-tenths to 55 on component readings of 55.9 for new orders, 57.8 for production or sales and 53.4 for employment. Goss said he expects the Utah work force to grow more than 22,000 during the remainder of this year.

In Wyoming, the Business Conditions Index surged nearly 14 points on higher component readings for new orders at 88.3, production or sales at 68.9 and employment at 77.3. Goss said he expects Wyoming payrolls to increase more than 5,000 during the remainder of 2011.