Colorado business index slips, but still signals growth

Ernie Goss

A monthly index tracking business conditions in Colorado has retreated for a second straight month, yet continues to forecast growth.

The Business Conditions Index fell more than a point in December, but at 53.8 remains well above a growth-neutral reading of 50.

“The growth of the manufacturing sector, especially for metal-producing firms, in the state continues at a healthy pace even as firms tied to the state’s energy sector experienced slower business growth for the month,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver. “Importantly, the state’s constructon industry is expanding at a solid pace.”

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 conditions over the next three to six months.

In Colorado, the overall index reflected lower component readings for production or sales at 50.7 and employment at 50.6. The reading for new orders advanced nearly eight points to 49.9.

The Business Conditions Index also declined for Utah and Wyoming as the combined index for the three mountain states fell 1.5 points to 54.4 in December.

With declines in each of the last three months, the index dropped to its lowest level of 2012. In December 2011, the index stood at 60.2.

Nonetheless, Goss said expects growth in the months ahead. “Based on our survey results over the past several months, I expect both overall job and economic growth to continue well into 2013.”

Manufacturing and value-added services industries, such as systems development companies tied to health care, continue to expand, he added.

The overall index for the mountain states reflected lower component readings for new orders at 49.9 and production or sales at 58.2.

The reading for employment slumped below growth-neutral 50 to 48.3.

“Durable and nondurable goods manufacturers pulled back on hiring for the month,” Goss said. “Moreover, energy firms and firms linked to energy have slowed their pace of hiring.”

At the same time, though, a component of the index tracking confidence among supply managers in the mountain states climbed more than eight points in December to 57.7. “An improving national economy and upturns in residential housing pushed business confidence higher,” Goss said.

A component of the index tracking inventories of raw materials and supplies rose nearly two points to 64.2 for a 37th consecutive month of growth. “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, edged down a half point to 69.2. “Even with the cheap money policy of the Federal Reserve, inflationary pressures at the wholesale level are trending downward,” Goss said.

The readings for new export orders and imports both fell nearly five points. “Slower mountain states growth restrained imports, while slow global growth pulled new export orders lower,” Goss said.

In Utah, the Business Conditions Index retreated more than three points to 54.2 in December on lower component readings for new orders at 53.6 and production or sales at 56.6. The reading for employment rose four points to 53.9.

In Wyoming, the Business Conditions Index slipped four-tenths of a point to 55.5 on lower component readings for new orders at 45.4 and employment at 46.6. The reading for production or sales edged up a half point to 55.