Economy looking up, say local business leaders

Filed under: News |

Business leaders expect the state and national economies to improve during the third quarter, according to the state Business Leaders Confidence Index.

The Index, paid for by Compass Bank, is conducted regionally by the Leeds School of Business at the University of Colorado in Boulder. The survey is given to business professionals in the region to determine how confident they are about a variety of economic factors.

In the most recent survey, business leaders across Colorado expressed optimism for both the state and national economies, sales and profits, and hiring and employment opportunities, which pushed the Index up to 66, up almost two points from last quarter.

Nearly four-fifths of respondents expect the national economy to show and moderate or strong increase in the third quarter and 72 percent think the state economy will thrive.

Interestingly, for the first time in the two-year history of the Index, business leaders were optimistic about their hiring plans, with just over half expecting to add jobs and 40 percent anticipating their hiring to remain unchanged. Just 7 percent projected to experience moderate or strong hiring decreases.

Business leaders said they are encouraged by reduced unemployment, employment gains in key sectors and strong exports of manufactured goods.

The state unemployment rate for May 2004 dropped to 4.6 percent, near the bottom of the range of natural unemployment (4.5 percent to 5 percent).

“The Index has been relatively stable during 2004, fluctuating in the mid-sixties. However, this quarter the sales, profits, hiring and state economy components of the Index are above 60 and expectations for the national economy topped 70,” said Richard Wobbekind, spokesman for the Leeds School of Business. “One of the most important factors to note is that more than half of panelists expect to add jobs, marking the highest percentage in the six quarters the survey has been compiled.”

About three-quarters of respondents expect a strong or moderate increase in sales, and 63 percent anticipate a strong or moderate increase in profits.

But business leaders expressed mixed views about whether prices for services or goods would increase. Almost half of respondents (mostly service providers) indicated that prices would stay the same in their industry, while 44 percent (mostly goods providers) expected an increase.

In came as no surprise that the Federal Reserve Board raised the federal funds target rate 25 basis points at the end of June.

When the BLC Index survey closed 10 days before that decision was made, 84 percent of business leaders felt that interest rates would increase. The increase was the first in four years, and brought an end to a 12-month period during which the rate was at a 45-year low of 1 percent.