More concerned about international conflicts, inflation and supply chain issues, Colorado business leaders are less optimistic heading into the next three months.

The Leeds Business Confidence Index dropped to 53.9 for the second quarter. That’s 4.1 points lower than the reading for the first quarter and 10.5 points lower than the reading for the second quarter of 2021.

The reading for the third quarter of 2022 slipped further to 53.3.

The research division of the Leeds School of Business at the University of Colorado at Boulder calculates the index based on the results of quarterly surveys of business leaders across the state and various industry sectors. Nearly 200 leaders responded to the survey upon which the latest index was based.

Readings above 50 reflect more positive than negative responses, however. And there’s encouraging trends for the labor market in Colorado, said Rich Wobbekind, senior economist at the Leeds School of Business.

“The state’s employment recovery has outperformed the nation, and six of Colorado’s seven metropolitan statistical areas rank among the top 100 nationally for employment growth,” Wobbekind said.

In addition to an overall score, the index provides individual scores for each of six metrics.

All six retreated between the first and second quarters of 2022, but only one fell below growth-neutral 50.

Confidence in the Colorado economy fell 5.7 points to 51.9. A total of 32.8 percent of business leaders who responded to the second quarter survey predicted moderate or strong increases in the state economy. While 42.1 percent expected no change, a total of 25.1 percent forecast moderate or strong decreases.

Gross domestic product, the broad measure of goods and services produced in the state, increased 6.3 percent between the fourth quarters of 2020 and 2021. GDP is forecast to increase 3.8 percent in 2022 and 2.7 percent in 2023.

Confidence in the national economy dropped 10 points to 40.4, the lowest score for the six metrics. A total of 51.8 percent of leaders anticipated moderate or strong decreases, while 27.2 percent expected no change and
21 percent predicted moderate or strong increases.

Hiring expectations declined 3.3 points, but at 60.4 was the highest score for the six metrics. A total of
51.8 percent of leaders predicted moderate or strong increases in hiring, while 32.3 percent expected no change and 15.9 percent forecast moderate or strong decreases.

Nonfarm payrolls grew 138,200 between in Colorado February 2021 and February 2022 — an increase of
5.1 percent. With the increase, the state regained all the jobs lost in March and April 2020 as a result of the COVID-19 pandemic and related restrictions.

Employment is expected to increase 3.4 percent in 2022 and 2.2 percent in 2023.

Sales expectations slipped 1.1 points to 59.1 with 52.3 percent of leaders anticipating moderate or strong increases, 30.3 percent no change and 17.4 percent moderate or strong decreases.

Expectations for capital expenditures fell 1.6 points to 56.7 with 42.5 percent of leaders predicting moderate or strong increases, 40.5 percent no change and 16.9 percent moderate or strong decreases.

Expectations for profits fell 2.9 points to 55 percent with 45.6 percent of leaders forecasting moderate or strong increases, 26 percent no change and 28 percent moderate or strong decreases.

Asked to explain the reasons for their expectations, 49 percent of leaders cited the conflict in Ukraine, while 40 percent cited inflation and 16 percent the COVID-19 pandemic. Another 10 percent cited supply chain issues and 10 percent cited higher energy prices.

Nearly 93 percent of those who responded to the survey said inflation has affected their businesses. And
46 percent said they expect to raise prices and pass on costs to consumers as a result. Another 34 percent said they’re cutting expenses, and 20 percent said they’re postponing expansions. 

More than 55 percent said they expect to increase wages in response to inflation.

While 16 percent of leaders said they expect inflation to moderate in the second half of 2022, a total of 60 percent don’t anticipate a change until 2023.