Leeds index: Optimism among state business leaders drops

Colorado business leaders are less optimistic going into the third quarter than last quarter, according to the most recent quarterly Leeds Business Confidence Index, or LBCI, released Monday by the University of Colorado Boulder’s Leeds School of Business.

The LBCI’s reading slid from 62.2 in the second quarter to 53.6 in the third, but remained higher than the 10-year average for the index and above the critical neutral mark of 50. A reading greater than 50 indicates positive expectations, while one lower than 50 indicates negative expectations.

“While third quarter data show some waning optimism, the outlook still remains positive,” said economist Richard Wobbekind, executive director of the Leeds School’s Business Research Division, who conducts the quarterly survey. “Going forward, the European debt crisis, the rate of employment growth and subpar construction activity are still areas of concern for the economy as a whole.”

Most of the business leaders who responded to the quarterly survey (66 percent) indicated that their organization’s recovery is stronger today than a year ago. However, panelists identified politics as the most worrisome factor and one that could disrupt their organization’s recovery. They also noted that higher interest rates could affect their organization.

Hiring expectations decreased from 59.6 in the second quarter to 53.7 in the third, while capital investment expectations measured 52.6, down from 58.9 last quarter.

Statewide, the strongest growth sectors year-over-year in May were in the professional and business services sector, which added 8,900 jobs. Education and health services added 7,800 jobs and the construction industry added 7,000. On the downside, the information sector lost 3,000 jobs and the government sector dropped by 400.

The outlook for both the state and national economies took a step back going into the third quarter, and for the 29th consecutive quarter optimism for the local economy outstripped that for the national economy.

The index measuring prospects for the state economy dropped from 67.1 to 56.6 in the third quarter, while the national index dropped from 62.2 to 46.0 – the only component to fall below 50.

Business leaders’ sales expectations for the third quarter fell from 64.6 to 58.1, while profit expectations decreased from 60.8 to 54.9.

To access the complete report visit http://leeds.colorado.edu/brd and click on the Leeds Business Confidence Index link located on the left side of the page.