DENVER (CBS4) – Colorado business leaders’ optimism dropped to its lowest point in the 17-year history of the Leeds Business Confidence Index, largely due to the coronavirus outbreak. Because most of the business closures and social distancing guidelines went into effect after the survey ended, experts say the outlook is likely to get worse before it gets better.

The quarterly survey from the University of Colorado asks Colorado business leaders about their expectations for the state and national economies, industry sales, industry profits, hiring and business spending.

“With all the uncertainty right now there is a lot of pessimism,” said Brian Lewandowski, executive director of the Leeds Business Research Division. “April could be the worst economic data month, assuming businesses start to reopen in May.”

Read the full report here.

Despite the sudden decline, business leaders expect the economy to start improving — or at least be “less negative” — in the third quarter.

Lewandowski says a lot of that will depend on how much longer businesses remain closed.

“[Their outlook for the third quarter] is less negative than their outlook for the second quarter… we expect things to be opening back up after May, after June,” Lewandoswki said.

The scores

An LBCI score of 50 indicates a neutral outlook. The overall index for the second quarter of 2020 is 29.7. Colorado business leaders expect the economy to rebound somewhat, giving the third quarter of 2020 an LBCI score of 38.2.

“There is optimism that the worst of the impact will be short-lived,” Lewandowski said. “Although this is a big drop for one quarter, the index saw a bigger cumulative drop during the Great Recession. This looks like it could be different.”

Colorado business leaders still expect the state economy to outperform the national economy over the next six months.

Optimism

Experts say the coronavirus caused a very sudden disruption in the economy, but there are reasons to believe it will begin to improve fairly soon.

“It’s like a hurricane hit the entire country… but we’ve still got the physical infrastructure,” said Richard Wobbekind, Senior Economist at Leeds School of Business.

Wobbekind said we did lose a lot of the business infrastructure, but that Colorado was in a good position before the decline — the economy was strong in the 4th quarter and the labor market was tight.

Wobbekind and Lewandowski both pointed to the graduated payments in the federal stimulus package as a reason to be hopeful.

With a lot of the job losses in lower-paying industries like retail and restaurants, Wobbekind said some people might be bringing in just as much as they were earning.

“I think there are a lot of positive signals in there for the market. I think the way they structured the household payments was pretty smart … it’s putting money in the hands of people who need it most right now,” Lewandowski said.

“A majority of Americans still have their jobs and we haven’t seen a deterioration of high-wage jobs yet,” said Lewandowski.

A key factor in the recovery will be how much people spend.

Resort communities will take a hit

Certain Colorado communities will be hit harder than others — particularly areas that depend on tourism. Resort towns will suffer not only from direct job losses but from also from a loss of tax revenue.

“This is going to be really hard on resort communities,” Lewandowski said. “Their revenue lifeblood is sales taxes and sales taxes are going to take a hit during this event.”

“It’s not just how much employment we’re losing, it’s going to be how much retail sales we lose in the next quarter,” said Wobbekind.

A lot of that sales revenue comes from out of state, so the recovery will be tied to the national economy.

“Out of state tourism is a big deal, Colorado is always sort of in the top five destinations,” Wobbekind said. “We need the national economy to recover and convention business to recover… Tourism needs a kind of total healing, not just a statewide healing.”

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