Leeds Business Confidence Index, Q1 2012

Publication

December 2011

The Leeds Business Confidence Index (LBCI) is a forward-looking index that gauges business leaders’ opinions about national and state economic trends and how their industry will perform in the coming quarter.

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Looking ahead to Q2 2012, Colorado business leaders’ optimism has resumed. The Leeds Business Confidence Index (LBCI) measures the confidence of Colorado business leaders in six categories: national economy, state economy, industry sales, industry profits, hiring plans, and capital expenditures. The LBCI’s reading improved from 47.3 in Q4 to 54.5 in Q1.

Confidence improved for all metrics, settling above the neutral mark (50). More robust sales and profits expectations have a lagging effect on hiring and capital expenditures. Expectations for the state and national economies both ticked up, with state expectations rocketing from 49 to 58.4 in Q1 2012. The expectations differential between the state and the nation remained high, at 7.2, in Q1, indicating greater confidence in the local economy than the national.

Looking back, many factors led to pessimistic readings in Q4 2011. Last quarter, the European debt crisis was on the verge of taking down Greece, spreading to other debt-burdened countries with structural deficiencies, and causing failures of large banks and even the common currency. The United States was coming off a ratings downgrade, the budget impasse threatened to shut down the U.S. government, and employment recorded softer growth leading up to last quarter’s LBCI release.

Looking ahead to Q1 2012, month- over-month employment figures and jobless claims are pointing to an improving labor market. The lack of consensus reached by the debt super committee, while disappointing, limited immediate impacts on federal spending and the markets. Drags on the recovery still persist—the European debt crisis, weak housing prices and construction, and less-than-robust employment growth. However, modest improvement in the economic situation has resulted in growing optimism.

LBCI