Recently in Leeds Business Confidence Index (LBCI) Category

Gary Horvath of the University of Colorado Business Research Division shares the key findings of the Leeds Business Confidence Index (LBCI) for this quarter. The LBCI measures local business leaders' outlook on the economy in areas like job growth, capital expenditures, sales and profits, and overall health. This latest report predicts job loss slowing considerably but capital expenditures remaining low. Because profit margins have shrunk, companies are still hesitant to make major business or employee investments. Overall, in 2010 Colorado should return to one of the top ten strongest state economies in the nation.

Read more detail in the previous blog post >

Slowly, but surely the economy is recovering. The forward-looking Leeds Business Confidence Index (LBCI), compiled by the BRD, posted a value of 51.7 for Q2 2010, the first time since Q3 2007 that the index registered above the neutral mark of 50.

Three of the six components posted values in expansionary territory or above the neutral mark - outlook for sales, profits, and the state economy. The components measuring the national economy, as well as prospects for increased labor and capital investments will continue to be a drag on the economy in the upcoming quarter.

Key points from the Q2 results include:
• The prospects for the state economy remain more positive than the nation, as both are greatly improved compared to a year ago.
• Historically, business leaders have been most upbeat about the sales component; however, many of those sales are a result of reduced pricing.
• Despite low inflation and wage pressures, business leaders will be challenged by reduced profit margins.
• Business leaders remain cautious about making both capital and labor investments.

Be on the lookout for the next release of the LBCI, coming June 1st. If you are a Colorado business leader, but not yet a panelist, please sign up for the June LBCI survey by clicking here. If you prefer to simply follow the status of the Colorado economy, click here. The entire process takes less than five minutes, and helps you stay on top of what other business leaders are thinking about the economic future of the state.

As we enter March, there have been no surprises in the performance of the economy as measured by the BRD's 2010 forecast presented last December.  At that point, we projected that the country would experience a decline in real GDP of -2.4% for 2009, with below potential growth of +2.2% in 2010.  While the 2009 estimate is unlikely to change, our projections for the current year appear to be on the conservative side. A review of 2010 output forecasts shows increased optimism among economists, pointing to real GDP growth in the range of 2.5% to 3.0%.

At the state level, there is increased optimism about improved economic conditions; however, companies remain hesitant to make investments in labor and capital. Nationally, both initial and continuing unemployment claims are trending downward from their peak a year ago. At the state level, initial claims spiked at a record level in January.  Continuing claims have been in the 73,000 - 80,000 range since mid-December, similar to where they were a year ago. These data suggest that both Colorado and the nation will see high unemployment long after the official end of the recession. Additionally, there is concern about the state budget, given reduced revenue streams from the loss of 100,000+ workers over the past year.  Both Colorado Legislative Council and  OSPB will provide a budget update in mid-March.

For more details on the changes in the Colorado economy, readers are encouraged to participate in the BRD's quarterly LBCI, a forward-looking indicator of the state economy. Expectations for Q2 will be published on April 1.

Economy Shows Signs of Recovery

Nationally, evidence continues to mount that the economy bottomed out during the second quarter and that lower than potential growth will occur through at least next year. Because the state economy is closely linked to the national and global economies, recent economic data point to a slow recovery for Colorado.

In late September, the BRD convened the estimating committees for the 2010 Colorado Business Economic Outlook.  Results from a straw poll of committee members predicted that Colorado would again experience negative employment growth next year, -0.1%. The more formal, in-depth forecast will be released by the BRD at the 45th annual Colorado Business Economic Outlook Forum on December 7 at 1:00 pm in Denver at the Grand Hyatt.

In early October, the BRD released the Q4 Leeds Business Confidence Index (LBCI). The results point to improved economic conditions in Colorado. The forward looking index increased for the third consecutive quarter, from 47.5 to 49.7. Moderate gains were recorded in five of the six index components, and three of the components are now above the neutral mark of 50. The only index component to register a decline was expectations for growth of the state economy.

While there is justifiable optimism because of the improvement of the overall index, the LBCI remains below 50. The fact that business leaders expressed continued concerns about profits, hiring, and capital expenditures suggests that the chances have increased that Colorado will lag the national economy in its recovery, much as it entered the recession later than the nation. This prognosis reflects decreased optimism in the strength of the state's recovery based on data from the construction and energy industries.

As part of its longstanding relationship with BBVA Compass, the Leeds School recently hosted the third quarter 2009 U.S. Regional Watch. Nathaniel Karp, Chief Economist for BBVA Compass, presented an overview of the national economy and was assisted by BRD researchers Richard Wobbekind and Gary Horvath in addressing local issues.

For updates throughout the year, check out the Leeds Business Confidence Index (LBCI), a forward-looking index for the state of Colorado published quarterly by the BRD (January, April, July, and October).

Colorado business leaders are invited to voice their opinion by becoming a panelist of the quarterly Leeds Business Confidence Index (LBCI). This forward-looking index gauges business leaders' opinions about national and state economic trends and how their industry will perform in the coming quarter. The fourth quarter survey will be open from September 1 until September 20.

Since its inception five years ago, Colorado business leaders have collectively identifed downturns in the economy resulting from our entry in Iraq in 2003, Hurricane Katrina, and the current downturn. Subsequently they also identified upticks in the economy.

After plunging to a record low in Q1 of 2009, the LBCI, compiled by the BRD, rose slightly in Q2 and surged upward from 35.5 to 47.5 for the third quarter of 2009. All six index components posted steep gains and two of the components passed the neutral mark of 50.

Each summer the BRD hosts an annual mid-year Business Economic Outlook (BEO) forecast update meeting to review its annual employment projections for the year. Members of the steering committees for the 2009 BEO convened in late June to share their thoughts about what they saw happening in their sectors of the economy and the factors that were driving industry changes.

The bottom line is that overall job losses for 2009 will be in the 3% range, or 60,000 jobs. This is update is substantially lower than the original forecast, presented in December 2008, that projected a decline of 4,300 employees. By year-end, job losses are projected for all sectors, except for Government, and Education and Health Care Services. Gains in both sectors will be driven by increased population.

It is anticipated that total employment for the summer months will average about 100,000 fewer jobs than 2008. Despite these steep declines, the rate of job loss is expected to slow during the third quarter and approach zero or turn slightly positive in the final quarter.

At the mid-year point, the greatest improvement has occurred in the housing market, which appears to have bottomed out in many parts of the country. On average, Colorado's home prices are slightly lower than a year ago, compared to an average decrease of 4% for the nation. At the same time, it looks as if the financial markets have stabilized, although credit markets remain tight and growth is unlikely to occur until credit becomes more readily available. On a positive note, consumer confidence most likely bottomed out in the first quarter; however, consumers remain overleveraged and are not in a position to lead an economic recovery in the short term.

A complete overview, including analyses for each of the sectors, is available in the most current issue of the Colorado Business Review. To stay on top of what is happening in the Colorado economy, business leaders are encouraged to become a panelist and participate in the quarterly Leeds Business Confidence Index. Finally, make plans now to participate in the 2010 Colorado Business Economic Outlook Forecast, to be held on December 7 at the Grand Hyatt Hotel in Denver.

The Leeds Business Confidence Index (LBCI), compiled by the Business Research Division, posted its second consecutive increase, moving from 35.5 to 47.5, after recording a record-low in the first quarter of this year. The forward-looking LBCI is comprised of six index components. For the third quarter, all six of the index components recorded gains, a sign of increased optimism.

The components measuring the state economy and sales outlook edged past the neutral mark of 50. On the other hand, business leaders expressed continued concern about profits, hiring, capital expenditures, and the performance of the national economy. These four factors were a drag on the overall indicator keeping it in negative territory.

Key points from the recent results include:

• The outlook for both the state and national economies are greatly improved.
• The prospects for the state economy remain more positive than the nation.
• Historically, business leaders have been most upbeat about sales.
• It is likely that companies will begin to experience measurable expansion in sales.
• Business leaders will remain in a cost containment mode as they continue to focus on the bottom line.
• Both hiring and expansion plans will remain on hold for as long as possible.

Check in again during the fall for the next release of the LBCI. Colorado business leaders are invited to serve as panelists for the September LBCI survey by clicking here. For those interested in following the economy by simply staying on top of the economy, click here.