The majority of Colorado business leaders still expect a recession in 2023

A majority of Colorado business leaders were forecasting a recession this year before another round of bank failures hit the financial system. (Spencer Platt, Getty Images)

Colorado business leaders are less pessimistic about the future than they were at the end of 2022, but a majority expect a recession later this year, according to the University of Colorado Boulder’s latest Leeds Business Confidence Index.

The LBCI measures confidence at six different points for the coming two quarters, with an index reading of 50 being neutral and anything below contracting. From a reading of 39.8 for the first quarter, the overall index rose to 45.1 for the second quarter and 44.8 for the third.

That represents an improvement from late last year, but marks the fourth quarter in which the LBCI was below 50, the third-longest bearish spell in the index’s 20-year history.

Business leaders are the least confident about the US economy, which had the lowest score at 37.1, and they are better about the Colorado economy, which had a score of 46.4. Of the six items examined, only industry sales managed to return to neutral. The negative outlook comes despite strong economic performance in the second half of the year, which is expected to continue into the first quarter.

A majority of panelists, 57%, said they believed the US economy was headed for recession, with 15% expecting it to be in the first half and 42% in the second half said Richard Wobbekind, senior economist at CU Boulder.

Wobbekind argued in December that Colorado’s economy was likely to keep pace with the US economy and slow. But whether it technically entered a recession wouldn’t matter unless some unknown problem emerged that triggered a deeper recession.

This unknown may have arrived in the form of the failure of Silicon Valley Bank and Signature Bank. The 230 panelists who attended responded between February 1 and February 20, before the banks collapsed, but they cited higher interest rates and persistent inflation as contributing to their expectations of a recession. A tight financial market is likely to weigh on confidence.

“I don’t think that’s that crazy given the possible impact of the banking system problems,” Wobbekind said on Friday, commenting on the view that a recession is imminent.