Colorado business leaders expressed pessimism ahead of Q3 2022, recording the fifth-lowest index in the 20-year history of the Leeds Business Confidence Index (LBCI). Business leaders point to inflation, interest rates and the supply chain, among other factors, for their negative perceptions.
Released by the Leeds Business Research Division (BRD) at CU Boulder’s Leeds School of Business, the index slipped 12.8 points to 41.1 ahead of the third quarter 2022 (a score of 50 is neutral), the second-largest drop on record.
All six components of the LBCI recorded negative perceptions, with the most optimism in industry hiring (48.3). Respondents expressed the least optimism in the national economy (27.7).
Looking out to Q4, the index dropped to 38, fourth-lowest outlook in the history of the index as the weight of economic headwinds overtake optimism.
“Inflation was by and large the greatest concern among the 216 surveyed panelists,” said Rich Wobbekind, senior economist and faculty director of the Business Research Division. “In Colorado, inflation is projected to increase 7.7% this year, and over 70% of panelists reported rising prices are already at least moderately impacting their business.”
According to a BRD model, inflation in Colorado is projected to increase 7.7% in 2022, slowing to 3.3% in 2023. In the Denver metro area, inflation grew more slowly than the nation in 2021 (at 8.3% year-over-year compared to 8.6% nationally)––the first time the region didn't outpace the country in inflationary growth since 2013.
Still, inflation is high, and survey respondents indicated that they plan to address it by increasing prices (52%), expense cutting (44%) and making fewer purchases (30%).
Impacts of inflation were also the top reason business leaders responded to the survey the way they did. Of all the reasons respondents gave for their answers, 60% said inflation cited inflation as a concern, followed by interest rates (27%), the supply chain (13%) and energy prices (9%).
Colorado’s personal income increased 0.8% year-over-year in Q1 2022, and per capita personal income increased 0.3%, both ranking Colorado 2nd in the nation.
Employment recovery in the state has also outperformed the nation, increasing 1.2% above the pre-recession peak as of May 2022. Year-over-year in May, employment increased 4.6% (124,000 jobs).
Economic expectations in Colorado dipped 12.1 points ahead of Q3, with nearly half (49.1%) of respondents predicting a moderate-to-strong decrease in the state economy.
When asked about recession expectations, nearly 23% of surveyed business leaders indicated the recession began in Q2 2022, while 57% anticipate it will begin in 2023.