Index: Colorado business confidence on the rise

A quarterly measure of confidence among Colorado business leaders has climbed to its highest level in five years.

The Leeds Business Confidence Index (LBCI) rose to 56.8 for the second quarter of 2011. That’s the highest level since the second quarter of 2006.

While confidence in the state and national economies has leveled, expectations for sales, industry profits, hiring plans and capital expenditures recorded aggressive gains, said Richard Wobbekind, an economist and director of the business research center at the Leeds School of Business at the University of Colorado in Boulder. Wobbekind conducts the quarterly survey upon which the LBCI is based.

“A continued upward trend in all of the indicators suggests that Colorado business leaders see sustained growth over the next quarter and even beyond,” Wobbekind said. “Higher sales and profits are fueling a lot of the business confidence that is out there now, and this is clearly turning into plans to invest in capital equipment and hiring more people, which is very important for the long-term growth of the economy.”

An index of 50 is neutral. An index greater than 50 indicates positive expectations, while an index lower than 50 indicates negative expectations.

One of the most significant changes to the index came in a component measuring hiring plans that increased from 52.5 for the first quarter to 56.3 in the second.

Despite the increase, the Colorado unemployment rate edged up two-tenths to 9.3 percent in February, the latest month for which estimates are available. Wobbekind said such mixed messages concerning unemployment rates are common during economic recoveries.

“One of the things that happens with the unemployment rate is it typically goes higher as firms start to hire because people who have been out of work start to come back into the work force again,” he said.

“I think this is actually a good thing because it signals to the rest of the country that this isn’t an ‘easy place’ to get a job,” he added. “This will probably slow down some of the flow of jobseekers into the state, which is good until we get our employment growth a little further along.”

Business leaders remain positive, but somewhat subdued, regarding national and state economic growth. The national index increased from 53.2 to 53.6, while the state index fell slightly from 56.5 to 55.5.