Colorado’s business leaders are stuck under a rain cloud as the Leeds Business Confidence Index fell to the fourth-lowest level in its 20-year history, with business owners pointing to inflation, interest rates and supply chain issues, among other factors, for their negative perceptions.

The index, released Thursday by the Leeds Business Research Division at CU Boulder’s Leeds School of Business, slipped 1.3 points to 39.8 ahead of the fourth quarter; a score of 50 is neutral.

Six factors of the Leeds Business Confidence Index – state economy, national economy, industry sales, industry profits, industry hiring and capital expenditures – recorded negative perceptions from business owners, with inflation being the primary reason for a gloomy outlook; over 77% of respondents expressing that inflation moderately to extremely impacted their businesses.

That’s why 57% of respondents said they planned to raise wages, 50% intended to cut expenses, 47% said they anticipated increasing prices and passing it on to consumers, and 29% were going to postpone expansion plans. 

“Our latest model shows that inflation in Colorado is projected to increase 8.2% in 2022,” said Rich Wobbekind, Business Research Division senior economist and faculty director. “The Colorado inflation rate is expected to slow to 4.1% in 2023. Our respondents reported slightly more optimism when asked about the new year, perhaps a reflection of this anticipated lower inflation.”

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Concerns surrounding rising interest rates and supply chain problems also abounded.

Confidence in the national and state economies ranked as the lowest components of the index despite both categories improving from last quarter.

Despite the dismal outlook of business owners, only rivaled by the Great Recession and the onset of the pandemic, Wobbekind noted that perceptions of the economy appear to be more extreme than the actual circumstances.

“I feel like perceptions are accurate but maybe a little bit more negative than reality,” he said. “The national economy is not in as bad shape as perhaps some of the survey responses indicate.”

While businesses have concerns about inflation and have suffered because of rising prices, the employment market indicated strength in the economy, Wobbekind said.

That was reflected in their confidence levels too.

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Respondents anticipated Colorado’s economy to outperform the national economy, which was the case when looking at the state’s employment recovery from the pandemic.

“Our labor force participation continues to do extremely well,” Wobbekind said. “We have the second highest nationally.”

Even though business leaders’ confidence soured leading into the fourth quarter, Wobbekind said there was reason to think the index may be hitting rock bottom before heading the other direction, largely because 17% of surveyed business leaders thought a recession began in the first half of 2022, 45% believed it arrived the second half of 2022 and 21% anticipate it will begin in 2023. 

“This could very importantly be an inflection or turning point in the index,” Wobbekind said.

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