Tom Kalinski, RE/MAX of Boulder

Tom Kalinski, RE/MAX of Boulder

Colorado is showing some early signs of economic recovery as Colorado business leaders expect sales and profits to improve in the third quarter of 2020.

According to the latest Leeds Business Confidence Index (LBCI), confidence is growing as Colorado business leaders’ look ahead to the third quarter of 2020. The improved outlook follows an historically low confidence level for the second quarter of the year,

The report shows a number of promising signs including expectations that sales and profits will have strong improvement, with the sales category signaling expansionary levels in quarter three.

“Most respondents indicated their company sales and employment may reach pre-pandemic levels in the second half of 2020 to the second half of 2021, while some indicate recovery is likely in 2022 or later, and others never expect to recover,” according to the LBCI summary.

The quarterly report, produced by the Leeds Business Research Division at the University of Colorado Boulder’s Leeds School of Business, reflects Colorado business leaders’ expectations for the state and national economies, industry sales, industry profits, hiring, and business spending. More than 400 business leaders responded to the latest survey, fielded between June 1 through June 19, 2020.

For the third quarter of 2020 the LCBI score is 44.3, which is a level recorded during the Great Recession and generally indicates a pessimistic outlook – a score of 50 would be a neutral outlook. But in this case, 44.3 is a marked improvement over the quarter two LBCI score of 29.7. The quarter four outlook rose to just above neutral.

The majority of respondents continued to cite COVID-19 for their pessimistic outlook, but glimmers of optimism shone through with individuals citing resiliency and pent-up demand for the comparatively optimistic outlook, according to the summary published by CU-Boulder Leeds School of Business.

“Business leaders are telling us they are optimistic the COVID-19 economic bounce back will occur fairly rapidly,” senior economist at the Leeds School of Business, Richard Wobbekind, said in a press release. “However, the pessimism we are seeing in business spending and hiring is a cause for concern.”

All six LBCI components improved in the third quarter. Still about 50 percent of respondents expect a decline in capital expenditures and nearly 40 percent said they expect a decrease in hiring.

The most improved score from the previous quarter is the national outlook. The state economy received a higher score with respondents indicating they believe Colorado will recover from the COVID-19 downturn more quickly than the rest of the nation.

The COVID-19 economy
The third quarter LBCI survey asked specific questions about business in the COVID-19 era.

Most respondents – 69 percent – reported declines in sales and slightly more than half – 58 percent – expect sales to recover by the second half of 2021.

As the impact of the novel coronavirus hit nationwide, Colorado business leaders took needed steps to keep their businesses from failing: 40 percent of Colorado business leaders reduced pay, 39 percent issued furloughs, and 34 percent implemented layoffs.

But roughly a quarter of employers say they are still hiring. Seventy percent say they expect employment to recover between the second half of 2020 and 2021.

Colorado’s gross domestic product (GDP) continues to be a bright spot. With 3.4 percent year-over-year and 2.6 quarter-over-quarter growth in quarter four 2019, the state outperformed the nation and continues to experience positive real GDP growth. During the same period, national real gross domestic product fell at a 5 percent seasonally adjusted annual rate (SAAR) in quarter one 2020, according to the third estimate from the Bureau of Economic Analysis (BEA).

In quarter one 2020, Colorado residents continued to experience growth of 3.4 percent year-over-year, according to the BEA. Colorado had the 11th-highest per capita personal income in quarter one 2020, at $61,878, but the state slipped to 39th for per capita personal

Read the full CU-Boulder Leeds Business Confidence Index report at: colorado.edu/business/brd/publications/2020/06/30/leeds-business-confidence-index-lbci-q3-2020

By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. For questions, e-mail Tom at tomkalinski33@gmail.com, call 303.441.5620, or visit boulderco.com.