Business leaders’ expectations for the fourth quarter were a little lackluster, but they’re not getting worse as they look ahead to the start of next year, according to the quarterly Leeds Business Confidence Index from the University of Colorado Boulder.
The LBCI looks at six metrics — for Colorado and the U.S. economy, as well as expectations for sales, profits, employment and capital expenditures — and tracks how they change over time. An index reading below 50 indicates expectations of contraction and above 50 of expansion.
Overall expectations were still positive at 53.9 as in the second quarter, but the index dropped 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 for the first. The outlook for the US and Colorado economies improved between the third and fourth quarters.
But looking at their own businesses and industry, expectations for the rest of the year have become more subdued.
“Business leaders clearly see weakness coming in the economy. Leaders see weakness in sales, employment and capital spending. We’re getting signs that things are slowing down,” Richard Wobbekind, senior economist and faculty director of the Leeds Business Research Unit, said on a news call Thursday morning.
The U.S. economy remains the most pessimistic, with Colorado’s business leaders scoring 30.7, up from 40. But you will see the US economy recover a bit in the first quarter. In Colorado, it rose 35 points to 40.2.
Wobbekind said a key test for the economy will be how quickly layoffs and closings can fill vacancies that are currently unfilled. This requires employers to open those positions when the situation eases.
17% of respondents said the recession will begin in the first half of the year, 45% expect it to begin in the second half of 2022, and another 15% expect the recession to not hit until the first half of 2023. .
Almost all respondents said their business was struggling with inflation, and 57% expected wages to rise in response. Exactly half expected to cut costs to fight inflation, while 47% planned to pass on higher costs to customers. The Department of Business Studies at CU expects Colorado inflation to average 8.2% in 2022 and average 4.1% in 2023.