Colorado business leaders remain pessimistic heading into the fourth quarter, according to the latest results of an index tracking their expectations.

While the economy has performed better than they anticipated, leaders remain worried about the effects of interest rates, inflation and politics.

“It is notable that a majority of business leaders reported that the 2023 economy has outperformed their expectations through the first half of the year, while still remaining bearish on their economic outlook,” said Brian Lewandowski, executive director of the business research division of the Leeds School of Business at the University of Colorado at Boulder.

The Leads Business Confidence Index declined a half point to 43.6 for the fourth quarter. A reading below 50 reflects more negative than positive responses to the quarterly survey upon which the index is based. The business research division calculates the index.

Three of the six individual components of the index advanced and three retreated. But all six remained below 50.

Expectations for the Colorado economy rose six-tenths of a point to 45.5 for the fourth quarter with 24.3 percent of business leaders who responded to the latest survey forecasting moderate or strong increases. At 41.9 percent, more said they expected moderate or strong decreases. And 33.8 percent anticipated no change.

The individual score was once again lowest for expectations for the national economy despite increasing nine-tenths of a point to 40.2. While 18.1 percent of business leaders forecast moderate or strong increases, 51.1 percent anticipated moderate or strong decreases. Another 30.6 percent expected no change.

The score was once against highest for expectations for sales, edging up two-tenths of a point to 48.2. While 30.8 percent of leaders anticipated moderate or strong increases, 36 percent forecast moderate or strong decreases. Another 33.3 percent expected no change.

Expectations for profits fell eight-tenths of a point to 44.9 with 22.6 percent of business leaders projecting moderate or strong increases, 38.7 percent moderate or strong decreases and another 38.7 percent no change.

Expectations for hiring fell 1.9 points to 41.8 with 14.4 percent of leaders forecasting moderate or strong increases, 41 percent moderate or strong decreases and 44.6 percent no change.

Expectations for capital expenditures fell 2.2 points to 40.9 with 15.8 percent of leaders anticipating moderate or strong increases in expenditures, 45.5 percent moderate or strong decreases and 38.7 percent no change.

Asked to explain the reasons for their expectations, 33.9 percent of business leaders responding to the fourth quarter survey cited higher interest rates.

Inflation ranked a distant second with 15.8 percent of leaders citing that as a reason for their response. Inflation in the Denver, Aurora and Lakewood metropolitan area is projected to increase 3.1 percent in 2023.

The effects of politics ranked third with 10.2 percent of leaders choosing that as a reason.

Asked to identify what they considered the most pressing challenges for the Colorado economy, 31.5 percent cited housing, followed by the labor market at 14.8 percent and inflation at 13.3 percent.

Gross domestic product, the broad measure of goods and services produced in Colorado, increased at a seasonally adjusted annual rate of 1.9 percent for the first quarter of 2023. The biggest gains occurred in the agriculture; arts, entertainment and recreation; and company and enterprise management sectors.

As of August, the latest month for which estimates are available, nonfarm payrolls increased 42,700 over the past year in Colorado. Employment increased 24,000 in leisure and hospitality, 7,200 in business and professional services and 6,400 in health services. Statewide employment is expected to increase more than 60,000 in 2023 — 2.2 percent for the year after posting 4 percent growth in 2022.

The seasonally adjusted unemployment rate rose two-tenths of a point to 3.1 percent in August, the highest level since April 2022.

Personal income, a measure of consumer strength, rose 1.2 percent from the fourth quarter to the first quarter of 2023. At $76,089, Colorado ranked eighth nationwide for the highest per capita personal income.