The downtown Denver skyline is pictured on July 3, 2023. (Photo by Kathryn Scott/Special to The Denver Post)
The economy has performed better this year than Colorado business leaders expected, but they remain pessimistic because of high interest rates, inflation and difficulties filling job vacancies.
The latest Leeds Business Confidence Index, released Thursday by the University of Colorado at Boulder, is the seventh consecutive survey showing business leaders’ pessimism about the national and state economy.
A value of 50 is neutral, while scores below this signal a negative outlook. The overall confidence index fell to 43.6 at the start of the fourth quarter of 2023, compared to 44.1 in the third quarter.
But the outlook for the first quarter of 2024 brightened somewhat and now stands at an overall value of 45.7.
“We’ve heard from business leaders, the majority of whom, about two-thirds, have said the economy has exceeded their expectations so far in 2023,” said Brian Lewandowski, executive director of research at CU Boulder’s Leeds School of Business.
At the same time, Colorado business leaders remain pessimistic about the economy, he added.
Recent surveys showed that business leaders had expected a recession this year.
High interest rates appear to be “the overarching drag on optimism” at the national and state levels, said Richard Wobbekind, associate dean and senior economist at CU Boulder.
Lewandowski said many economic indicators continue to point to a growing economy. Nationally and in Colorado, consumer spending, gross domestic product, personal income and employment continue to rise.
In August, Colorado’s labor force grew 2% from a year ago, reaching a historic record of 3.25 million workers, Lewandowski said. Still, there are “a number of headwinds” that economists are watching closely, including high interest rates, inflation, energy prices and labor shortages.
Colorado businessmen viewed housing as the state’s most pressing challenge. Housing affordability and availability is an issue across the state.
Labor shortages, inflation and interest rates were cited as other key concerns. A total of 222 managers took part in the survey from September 1st to 20th.
The possibility of a federal government shutdown, sparked by disputes in Congress over funding, was mentioned only a few times, Lewandowski said.
The Business Confidence Index examines six areas to gauge opinions on economic trends: the state and national economy; industry sales, profits and hiring; and capital expenditures.
The results of the latest survey show that business leaders are the most pessimistic about the economy, reporting a score of 40.2 for the fourth quarter. The state’s economy scored 45.5 on the confidence scale, up from 44.9 in the third quarter.
Industry sales received the greatest vote of confidence at 48.2. The outlook for the first quarter of 2024 is positive, but only slightly. All numbers are still in the 40s, i.e. in negative territory.
“I think a lot of people expected a recession this year,” Wobbekind said. “I think they think if they get through the fourth quarter, things will be better going into the new year.
“And I think some of that has to do with hopes or expectations about interest rates and the economy, frankly,” he added.
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