Colorado’s Business Conditions Index plummeted in July to 49.6 from 58.6 in June, indicating a slowing economy in the state, according to the Goss Business Conditions Index released on Wednesday.
An index value greater than 50 indicates economic expansion, while a value lower than 50 indicates contraction.
The report, based on a monthly survey of supply managers in Colorado, showed new orders at 51.0, production or sales at 53.5; delivery lead times at 43.3; inventories at 55.4 and employment at 59.0
“With 62 of 64 counties in the state suffering through significant to severe drought conditions, it was not surprising to record an overall index below growth neutral,” said Ernie Goss, who conducted the survey.
“While food production, both on the farm and in the factory, are not a substantial part of the state economy, the backward linkages to other businesses in the state are important,” he added.
“As a result, I expect the drought to continue to weigh on the state economy in the months ahead,” said Goss.
The report said that for the three state-area of Colorado, Utah and Wyoming, the index advanced above growth neutral 50.0 to 56.1, down from 57.2 in June.
But Goss cautioned that the drought will play a key role in the months ahead.
“Almost 80 percent of the 116 counties in the three state region have been declared by the USDA a drought disaster area,” said Goss. “However at this point in time, weather conditions have yet to adversely affect companies in sour survey although the readings for Colorado were considerably lower than for Utah and Wyoming.”
He said only 14 percent of the firms reported that drought conditions have increased the costs of inputs for their companies’ sales, while almost none reported impacts on company sales.
“I expect this to change in the months ahead, pulling the overall index lower,” said Goss. “A stronger dollar, making U.S. goods less competitive abroad, will also dampen growth in the months ahead,” said Goss, the economic research director of the Goss Institute.
One bright note was employment.
“The Mountain States region continues to outperform the U.S. in terms of job growth. However, I expect the advantage to close in the months ahead as regional growth tied to exports and energy weaken,” said Goss.
Howard Pankratz: 303-954-1939, hpankratz@denverpost.com or
