Survey: Colorado business leaders shaken, not stirred

Phil Castle, The Business Times

Richard Wobbekind

Colorado business leaders are more shaken than stirred heading into the third quarter, increasingly concerned about inflation and the likelihood of recession and less confident as a result.

The Leeds Business Confidence Index dropped 12.8 points to 41.1 for the third quarter. That’s the fifth-lowest reading in the 20-year history of the index, based on the results of surveys of business leaders from across the state and industry sectors.

The latest results were eye-opening, said Rich Wobbekind, senior economist and faculty director of the business research division of the Leeds School of Business at the University of Colorado at Boulder. 

Readings below 50 reflect more negative than positive responses. Along with the overall score, individual scores for each of six metrics the index tracks also fell below 50.

The reading for the fourth quarter fell further to 38, the fourth-lowest level for the index, with five of six metrics declining further.

Wobbekind attributed the pessimism to inflation, which is projected to increase 7.7 percent in Colorado this year and 3.3 percent in 2023. Inflation that significant hasn’t occurred in 40 years. So many business leaders haven’t experienced anything like it, he said. “This is a new phenomenon for a lot of people.”

Nearly 70 percent of the 219 leaders who responded to the third quarter survey said higher prices have at least moderately affected their businesses. While 56 percent said they expect to increase wages and 52 percent prices, 44 percent said they expect to cut expenses and 30 percent anticipate making fewer purchases. 

Almost 23 percent of respondents said they believe the United States is already in a recession, and 57 percent said they expect the economy to slip into recession next year.

Expectations for the Colorado economy fell 12.1 points between the second and third quarters to 39.8. A total of 49.1 percent of business leaders who responded to the third quarter survey predicted moderate to strong decreases in the economy, 37.5 percent expected no change and a total of 13.5 percent anticipated moderate or strong increases.

Expectations for the national economy were even worse, falling 12.7 points to 27.7. The gap between expectations for the state and national economies is at its widest point ever, Wobbekind said.  A total of 76.4 percent of survey respondents predicted moderate to strong decreases in the national economy, 19 percent anticipated no change and 4.6 percent expected a moderate increase.

Hiring expectations fell 12.1 points, but at 48.3 was the highest reading among the six metrics. While 33.8 percent of respondents expected moderate to strong decreases in hiring, 31 percent expected moderate to strong increases. Another 35.2 percent anticipated no change.

Sales expectations fell 12.7 points to 46.4. While 42.6 percent of respondents predicted moderate to strong decreases in sales,
31 percent expected moderate to strong increases and 26.4 percent anticipated no change.

Expectations for profits fell 12.8 points to 42.2 with 50 percent of respondents expecting moderate to strong decreases, 24.6 percent moderate to strong increases and 25.5 percent no change.

Expectations for capital expenditures 14.6 points to 42.1 with 42.1 percent of respondents anticipating moderate to strong decreases, 20.4 percent moderate to strong increases and 37.5 percent no change.

Still, some economic indicators offer encouragement, Wobbekind said.

Personal income in Colorado 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 on a year-over-year basis. The state ranked second nationally for both indicators, he said.

Colorado employment also has rebounded since the COVID-19 pandemic. As of May, the latest month for which estimates are available, nonfarm payrolls had increased 1.2 percent above the pre-pandemic peak. Payrolls have grown 4.6 percent over the past year.