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 a 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 Q3.
"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 the 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’s 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 1-19, 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 Q2 LBCI score of 29.7. The Q4 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 Q4 2019, the state outperformed the nation and continues to experience positive real GDP growth. During the same period, the national real gross domestic product fell at a 5 percent seasonally adjusted annual rate (SAAR) in Q1 2020, according to the third estimate from the Bureau of Economic Analysis (BEA).
In Q1 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 Q1 2020, at $61,878, but the state slipped to 39th for per capita personal