Why Are Colorado Business Leaders Less Confident in State Economy?

January 8, 2025

For the first time in two decades, Colorado business leaders have shown greater confidence in the national economy than their own state’s economic prospects, revealing an unexpected shift in confidence. Insights from the Leeds Business Confidence Index (LBCI) for the first quarter of 2025 highlight this phenomenon, with the index rising 3.3 points from the previous quarter to a neutral score of 50. Specifically, the national economy received a confidence score of 50.3, marginally higher than the state economy’s score of 50.1.

Historical Context of State-National Confidence Inversion

The Last Inversion in 2005

Historically, the last time Colorado business leaders displayed more confidence in the national economy was in 2005. At that time, Colorado lagged behind the national recovery from the early 2000s tech recession. This inversion, therefore, is not entirely unprecedented but rare and noteworthy given the state’s significant economic growth over the last two decades. Richard Wobbekind, senior economist and faculty director of the Business Research Division at the University of Colorado Boulder, along with Brian Lewandowski, the executive director of the same division, point to election-induced uncertainties as a significant factor contributing to this shift.

They emphasize that concerns over potential policy changes under President-elect Donald Trump’s administration, which might impact key Colorado industries, particularly those related to climate technology, are causing apprehension. Business leaders are wary of how new regulations, shifting energy policies, and other federal directives could impact local industries and overall economic health in Colorado. This cautious outlook underscores the delicate balance between optimistic national trends and localized economic challenges within Colorado.

Causes of Current Confidence Shift

The decline in Colorado’s economic momentum further exacerbates this shift in confidence. Despite being one of the fastest-growing economies in the United States over the last 20 years, recent data points to slower growth rates. This slowdown is attributed to sluggish population growth and lower net migration, which hinder labor force expansion and job creation. Colorado’s 60th annual Business Economic Outlook report highlights that while the state displayed robust medium-term economic health from 2008 to 2023 in terms of GDP, employment, population, and income growth, its short-term performance has faced significant setbacks.

The first-quarter LBCI score, although improved from the previous quarter, reflects a varied spectrum of business expectations. Optimism and pessimism appear to be in balance, resulting in a neutral overall score. Business leaders’ sentiment, often oscillating between cautious optimism and pessimism, reveals an inherent uncertainty driven by anticipated changes in regulatory, energy, tariff, immigration, foreign policy, and health care policies.

Business Leaders’ Sentiment and Concerns

A Comparison with 2017

Comparing the current sentiment with that during Trump’s first term in 2017 reveals a notable distinction. At that time, the overall LBCI score was significantly higher at 60.3 for both the national and state economies. This stark difference underscores the decline in confidence post the initial phase of Trump’s presidency. Business leaders today express more caution, possibly due to the experience and implications of policies introduced during Trump’s first term.

The cautious sentiment among Colorado business leaders today reflects a broader apprehension about forthcoming policy changes. The uncertainty regarding new regulations, potential energy policy shifts, and economic conditions has many business leaders weighing the implications carefully. Their mixed feelings are evident as they navigate potential changes that could influence their industries and overall business environment.

Future Implications and Economic Outlook

For the first time in twenty years, Colorado business leaders have displayed more confidence in the national economy compared to their own state’s economic prospects. This unexpected trend has been reflected in the insights provided by the Leeds Business Confidence Index (LBCI) for the first quarter of 2025. The index experienced an increase of 3.3 points from the previous quarter to a neutral standing of 50, signifying balanced sentiments. Notably, the national economy earned a confidence score of 50.3, which, though only slightly higher, surpassed the state economy’s score of 50.1.

This subtle yet significant change indicates that business leaders believe the national economic conditions might be more favorable or stable than those within Colorado. The LBCI, which gathers data from business leaders to gauge economic outlooks, has not shown such a shift in focus for two decades. The reasons for this shift could be numerous, ranging from political influences to market dynamics. Regardless, Colorado’s business community now perceives the broader U.S. economy as marginally more promising than their state’s economic health for the coming months.

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