Diminishing Confidence in US Economy Reported by CU Business School
On the one side where most of the economic institutions in USA continue to predict strong economic growth at both the state and national level, the Leeds School of Business at the University of Colorado Boulder reported a diminishing confidence in the economy among 254 Colorado business leaders on Monday. It means that Colorado business leaders are lowering their expectations going into the new year.
The Leeds Business Confidence Index (LBCI), compiled by the Leeds Business Research Division quarterly for 16 years, measures business leaders’ expectations for the state and national economy considering industry sales, profits, hiring plans and business investment. Business leaders defined that they are more optimistic about the state economy than the national economy. The 234 among 254 panelists were still positive about Colorado’s economy for the next quarter, with a reading of 51. “All of the sub-categories around their business—capital expenditures, hiring, sales and profits—are all above 50 or in the expansionary territory,” said BRD Executive Director Richard Wobbekind. “So they’re still optimistic, but not bullishly optimistic.”
“We just came through the holiday season with really strong retail sales,” Wobbekind said. “The employment numbers are still very strong. The unemployment rate is still low. GDP growth for the fourth quarter will end up being a very solid number. I don’t think you can look at anything related to the real economy, other than perhaps housing, and say, “It’s really slowing down. There is plenty of spending power out there.”
What is the Reason Behind These Disappointing Statistics ?
According to the report generated by LBCI, the growing concern is largely driven by instability as a result of the Federal Reserve Bank indicating potential interest rate drop with limited access to capital, weaker job growth, increased trade tensions, near record levels for the S&P 500, and growing tensions in the Middle East.
While those who participated in the survey expect industry sales, profits, hiring and capital expenditures to continue to grow throughout third quarter of this year, 2019, still confidence in the overall state economy dipped below 50% for the first time since 2011. The LBCI marked a drop to its lowest point since 2011. The overall reading is roughly neutral, at 50.1. A score above 50 signals a positive outlook, a score below 50 marks a negative outlook. The early expectations for the fourth quarter turn clumsy, with a low outlook that hasn’t been seen since the Great Recession, according to the report.
The national economy is predicted to be even worse. Of the 254 panelists who participated in the quarterly report, just 43% said they were optimistic about the future of the national economy, slightly more than 3% below projections for the second quarter and the third straight quarter posting below 50%.
“Businesses just hate uncertainty,” said Richard Wobbekind. “When you continually give them uncertainty, they become very cautious, they stop investing, they stop hiring and they take a wait-and-see approach.”
The annual economic forecast released by the Leeds School of Business in December found that while Colorado’s economy is expected to slow, the Boulder County economy continues to resist national and state trends as more high-tech industries are relocating to the area.
“Boulder County continues to outperform the state and national economies in job growth, educational attainment and capital investments,” the report stated. “High-tech industries like aerospace are pushing higher than the state’s average wages. The outlook remains positive for 2019.”
