About 80% of Colorado business leaders believe the U.S. economy has either already entered a recession or will do so by 2023, according to the Leeds Business Confidence Index survey released Wednesday by the University of Colorado Boulder’s Leeds School of Business.

Pessimism oozed out of the report, which covers most of the second quarter and looks ahead to Q3, as the index recorded its fifth lowest level in the 20-year history of the report.

The index plunged 26.2 points year-over-year to 41.1 ahead of the third quarter. A score of 50 is considered neutral. 

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Inflation drove the sour outlook, as 70% of the survey’s 216 panelists reported rising prices impacting their business, at least moderately. More than half, 52%, reported hiking their company’s prices to keep up.

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The survey tracks six areas: national economy, state economy, industry sales, industry profits, industry hiring and capital expenditures. Every one of the categories fell from the first quarter.

“The business leaders are looking at this, they’re looking at their business in the pipeline, and they’re not feeling good about what they’re seeing right now,” said Richard Wobbekind, senior economist and faculty director for the Leeds Business Research Division.

The sliver lining for Wobbekind came with the report showing about half of the firms interviewed are continuing to hire.

“That’s good news for the general economy,” he said.

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While many were still confident in Colorado’s economic outlook, there was a substantial dip in the confidence in the national economy.

“That’s the largest gap we’ve ever had between the national economy and the state economy,” Wobbekind said.

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Researchers expect Colorado’s inflation rate to increase to 7.7% this year but slow to 3.3% in 2023.

“When you have price increases, leading to cost increases, which lead to more price increases, you get that kind of spiraling piece that’s potentially out there,” Wobbekind said.

Wobbekind said many of today’s business leaders have never experienced inflation like this, considering it is the worst in 40 years.

“It’s a new phenomenon for a lot of people,” he said. “People would prefer higher interest rates and would accept higher unemployment rather than face inflation.

“It makes some sense, because when you think about unemployment, even at the peak of the COVID recession, we had 20 million-plus people unemployed. But when you talk about inflation, you’re talking about 130 million households that have lost purchasing power over the past year. Monthly expenses are costing $500 or more than they did before the inflation began. So it affects everybody and I think that’s why it’s so in-your-face.”

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Economists will be watching the gross domestic product (GDP) level closely when the second quarter ends Thursday. The national GDP fell 1.4% in the first quarter. Economists traditionally define a recession as starting when the GDP falls two quarters in a row.

“The slowdown followed the strongest annual growth in nearly four decades,” the report states. “Consensus Forecasts’ expectations for real GDP growth has been descending — down to 2.6% growth in 2022.”

In Colorado, the GDP rose 6.3% year-over-year in the fourth quarter of 2021. The state GDP is projected to increase 3.9% in 2022 and 1.7% in 2023, according to the report.

“Is it possible that the (national) second-quarter GDP will be negative? Yes, it’s possible,” Wobbekind said. “I don’t think it’s probable.”