Phil Castle, The Business Times

Colorado business leaders are more pessimistic heading into the fourth quarter, according to the latest results of a quarterly survey.

“We are clearly getting some signals from businesses things are clearly slowing down,” said Rich Wobbekind, senior economist and faculty director with the business research division of the Leeds School of Business at the University of Colorado at Boulder.

But even as concerns mount over the effects of higher inflation, employment remains strong, Wobbekind said. Moreover, expectations for the new year are slightly higher.

The Leeds Business Confidence Index fell 1.3 points to 39.8 for the fourth quarter. That’s the fourth-lowest reading in the 20-year history of an index based on surveys of business leaders across the state and industry sectors. 

Looking ahead to the first quarter of 2023, the index rose to 41 — the fifth-lowest reading ever, but a 1.2 point gain that could portend a turnaround.

Readings below 50 reflect more negative than positive responses.

Along with the overall score, individual scores for each of six metrics the index tracks remained below 50 in the fourth quarter. While expectations for the state and national economies increased, expectations for capital expenditures, hiring, profits and sales all decreased.

Wobbekind said the latest survey results followed two consecutive quarters of decreases in gross domestic product, the broad measure of goods and services produced in the United States. The results also reflected concerns over high inflation and the response of the Federal Reserve to raise interest rates.

In Colorado, inflation is forecast to increase 8.2 percent in 2022 and 4.1 percent in 2023, he said.

Among the business leaders responding to the latest survey, 77 percent reported moderate to extreme inflationary effects on their operations and 98 percent reported at least some effects, he said.

While 57 percent of respondents expected to raise wages to recruit and retain employees, 47 percent planned to increase prices. Fifty percent said they’re cutting expenses and 29 percent planned to postpone expansions. Sixty percent of the respondents said they expect inflation to moderate in 2023, though.

While 17 percent of business leaders said they believe the national economy already has slipped into a recession, 45 percent said they expect a recession to begin in the second half of 2022 and 21 percent in 2023.

Expectations for the Colorado economy edged up two-tenths of a point to 40 for the fourth quarter of 2022. A total of  12.9 percent of respondents anticipated a moderate or strong increase in the economy, 39.3 percent no change and 47.8 percent a moderate or strong decrease.

Expectations for the national economy rose three points. But at 30.7 the score was the lowest among the six metrics for the fourth quarter. While 8 percent of respondents expected moderate or strong increases, 22.1 percent anticipated no change and 70 percent forecast moderate or strong decreases.

The score was highest for hiring at 43.3, although that reading dropped five points from the third quarter. For the fourth quarter, 12.9 percent of respondents expected moderate or strong increases in hiring, 39.3 percent no change and 47.8 percent moderate or strong decreases.

The score for sales fell 4.2 points to 42.2 with 23.3 percent of respondents anticipating moderate or strong increases, 25.8 percent on change and 50.9 percent moderate or strong decreases.

The score for profits fell a half point to 41.7 with 19 percent of those who responded expecting moderate or strong increases, 32.5 percent no change and 48.5 percent moderate or strong decreases.

The score for capital expenditures fell 1.3 points to 40.8. While 15.9 percent of respondents anticipated moderate or strong increases, 41.1 percent no change and 42.9 percent moderate or strong decreases.

Even as the overall and individual scores of the index declined, Wobbekind said other indicators offered encouragement.

Nonfarm payrolls grew 108,300 in Colorado between August 2021 and August 2022. Employment is forecast to increase 4.1 percent in 2022 and 1.8 percent in 2023, he said.

Personal income increased eight-tenths of a percent in the first quarter of 2022 compared to the first quarter of 2021. Per capita personal income rose three-tenths of a percent. Colorado ranked second nationally for both indicators, he said.