Colorado business index slumps to four-year low

Ernie Goss

A monthly index tracking business conditions in Colorado has slumped to its lowest level in more than four years as slowing in exports and the effects of a federal government shutdown more than offset increasing construction activity.

The Business Conditions Index fell more than seven points in October and at 44.9 no longer forecasts growth over the next three to six months. The reading is the lowest since the index stood at 42 in June 2009. The index has slipped below what’s considered a growth-neutral reading of 50 only four times since then.

“Manufacturing slowed significantly for the month, especially that tied to international markets. On the other hand, construction activity remains strong and will boost businesses tied to this sector in the months ahead. I expect a rebound for November as the losses connected to the government shutdown wane,” said Ernie Goss, director of the Goss Institute for Economic Research in Denver.

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 37.5, production or sales at 35 and employment at 46.3.

The Business Conditions Index for the mountain states retreated almost a point to 50.1 in October to remain just above growth-neutral 50. The reading was the lowest since the index stood at 41.4 in June 2009.

“This month the federal shutdown, a pullback in export orders and slower growth in the energy sector more than offset improving construction activity in the region,” Goss said.

The overall reading for the mountain states reflected lower component readings for new orders at 44.1 and production or sales at 43.4. The reading for employment rose a half point to 49.2.

“Manufacturers linked to agriculture and energy are growing at a slower pace than this time last year. On the other hand, metal producers and food processing firms are also expanding at a solid pace,” Goss said.

Even as Goss attributed the declined in the index in part to a 16-day federal government shutdown, supply managers responding to the October survey said the effects weren’t that widespread. While 16.7 percent of managers said the shutdown hurt their businesses, 83.3 percent said the shutdown had no effect on their operations.

Meanwhile, though, a component of the index tracking confidence among supply managers in the three states edged down another three-tenths of a point to 41.9. “While we conducted all surveys after the debt ceiling and federal shutdown skirmishes had ended, the clearly had a dampening impact on business confidence,” Goss said.

Still, another component of the index tracking inventories of raw materials and supplies climbed more than two points to 54.5.

The reading for prices paid, a measure of wholesale inflation, retreated more than a point to 60.2 in October. “While the inflation gauge remains in a range indicating only modest inflationary pressures, the Federal Reserve’s $85 billion monthly bond buying stimulus program continues to boost asset prices such as ranch and farm land and housing at rates that are not sustainable,” Goss said.

In Utah, the Business Conditions Index fell more than a point to 50.9 despite higher component readings for new orders at 46.7 and employment at 49.3. The reading for production or sales fell to 43.9.

In Wyoming, the Business Conditions Index advanced a point to 55.8 to remain above growth-neutral 50 for 48 straight months. The reading reflected a higher reading for employment at 49.6, but lower readings for new orders at 58.1 and production or sales at 57.