According to the University of Colorado Boulder’s quarterly Leeds Business Confidence Index, business leaders’ expectations for the fourth quarter fell slightly but did not worsen when looking ahead to the beginning of next year.
The LBCI looks at six indicators — the outlook for the Colorado and U.S. economies, as well as expectations for sales, profitable hiring and capital spending — and tracks how they have changed over time. An index reading below 50 indicates an expected contraction, while a reading above 50 indicates an expansionary expectation.
As recently as the second quarter, the headline forecast was still positive at 53.9, but it fell sharply to 41.1 in the third quarter as rising inflation, supply chain constraints, labor shortages and the war in Ukraine weighed on sentiment. The outlook for the fourth quarter fell slightly to 39.8, but rose to 41 in the first quarter. The outlook for the U.S. and Colorado economies improved between the third and fourth quarters.
But when looking at their own businesses and industries, expectations for the rest of the year waned further.
“Business leaders have made it clear that they see weakness in the economy ahead. Leaders are seeing weakness in sales, hiring and capital spending. We are getting a signal that things are slowing down,” said Richard, senior economist and head of faculty at Leeds Business Research Dvorbekind said on a news conference call Thursday morning.
Business leaders in Colorado remained much more pessimistic about the U.S. economy, which scored 30.7, compared to Colorado’s 40. But they see the U.S. economy rebounding in the first quarter, resulting in a score of 35, while Colorado increased to 40.2.
A key test for the economy will be how quickly those laid off by layoffs and closures can move into some of the vacancies that are currently vacant, Wobekind said. This will require employers to keep those positions open while conditions soften.
Some 17% of respondents said the recession had already started in the first half of the year, while 45% expected it to begin in the second half of 2022, and another 15% did not expect the recession to begin until the first half of 2023 Appear.
Almost all respondents said their business was squeezed by inflation, with 57% expecting to increase wages in response. Exactly half expect to cut costs to fight inflation, while 47% plan to pass on higher costs to customers. CU’s business research division expects inflation in Colorado to average 8.2% in 2022 before slowing to an average of 4.1% in 2023.