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The Leeds Business Confidence Index (LBCI) nudged closer to neutral territory ahead of the second quarter 2023 but remained pessimistic, marking the third-longest period of pessimism in the index’s 20-year history.

Prepared and released by the Leeds Business Research Division (BRD) at CU Boulder’s Leeds School of Business, the index—which gauges Colorado business leaders’ opinions about economic trends and how their industry will perform in the coming quarter—recorded a score of 45.1 ahead of Q2, up 5.3 points from Q1 (a score of 50 is neutral).

Members of the media are invited to join a virtual media call today at 10 a.m. today to discuss the index.

While all six components of the LBCI improved from the previous quarter, five still recorded negative perceptions. The most optimism in industry sales (50.4), which also recorded the largest quarter-over-quarter jump (9.5 points). Respondents expressed the least optimism in the national economy (37.1), though that number did improve from 34.4 in Q1.

Expectations around the state economy also improved by 4.6 points to 46.4.

Interest rates and inflation continue to weigh on Colorado business leaders, with 38% and 31% of respondents, respectively, noting those factors as reasons for their outlook.

“Panelists indicated in the survey that they do expect inflation to improve as the year progresses,” said Rich Wobbekind, senior economist and faculty director of the Business Research Division. “Our forecast shows inflation in the Denver-Aurora-Lakewood metropolitan statistical area (MSA) is projected to increase 4.3% this year, a slight improvement from the 4.5% increase projected last quarter.”

A pessimistic outlook in hiring expectations and capital expenditures indicates continued strained business conditions in the state. Capital expenditures jumped a modest 2.7 points to 42.4 in Q2. The nominal value of construction starts—an indicator of capital expenditures—in Colorado decreased 38% year-over-year in January and February 2023, according to Dodge Data and Analytics.

Hiring expectations increased to 46.1 in Q2 (up four points quarter-over-quarter), despite a tight labor market. Even so, 34.8% of respondents expect hiring to slow in Q2 compared to 26.1% who maintained a positive outlook (39.1% remained neutral).

Employment growth in Colorado’s six of seven MSAs fell below the national average in January, with Boulder recording the largest year-over-year growth (2.5%) and Fort Collins notching a 0.3% decrease in employment.

Business leaders were also surveyed about their recession expectations. A majority (42.3%) expect a recession to begin in the second half of 2023, while 15.3% expect it to happen in the first half of the year. Of the remaining respondents, 18.6% anticipate a recession in or after 2024 and the rest (23.7%) are uncertain.