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ARCHIVED  July 1, 1997

Economy will grow, but pace will decline

Last quarter, the 1st Choice Bank/Northern Colorado Business Report Leading Economic Indicators examined the health of the Northern Colorado economy on a long-run basis, using those data series available with a two-year or longer lag.

This quarter, we examine data series available with a six-month lag. Next quarter we will examine short-run series, those available with less than a six-month lag.

The intermediate-run indicators we examine here are fundamental, measuring whether the underlying strength of the national, state and local economy is such that growth is likely to continue.

We want to know if the population in our economy is growing, whether the income of our population is increasing (and how fast), whether motor vehicles are increasing (Think how much cars and trucks stimulate our economy!), whether bank deposits are increasing (Is the new money staying in the local economy?), whether new businesses are being formed to capture the increasing incomes and, finally, whether retail sales and sales-tax collections are increasing and how fast (to pay for infrastructure).

Many of these indicators will be compared with national and state data to see whether our economy is keeping pace with those larger economies.

Population in Northern Colorado is growing but not as fast as in 1992-1994. The average annual growth rate since 1969 has been 2.89 percent. The maximum was 8.22 percent in 1971-72, and the minimum was 0.47 percent in 1974-75. The rate in 1992-94 was more than 3.3 percent annually but slowed to about 2.3 percent annually in 1994-96.

Are residential incomes increasing? We don’t have current numbers for Northern Colorado, but taxable residential income in Colorado is growing 50 percent faster than in the nation as a whole. Quarterly growth in the United States from 1987 through the third quarter of 1996 was 0.63 percent; the same number for Colorado was 0.90 percent.

Annually, over the same period, U.S. residential income grew 2.76 percent, Colorado residential income grew 3.77 percent. Annual growth in Colorado has mostly been above 4.5 percent since the beginning of 1995.

Annual taxable residential income growth is forecast to be 2.45 percent in the United States through 1999 and 3.89 percent in Colorado.

Additional money will be available in Northern Colorado for spending on goods and services. Is this additional income being deposited in local banks?

Total deposits in Northern Colorado have been increasing more than 10 percent annually since 1992, 18 percent in 1992-93. This rate slowed to 7.37 percent in 1995-96 and is forecast to be greater than 6.5 percent annually through 1999. This growth rate contrasts with less than 5 percent annually from 1987 to 1992.

So are these new people and the higher incomes creating more road traffic, more expenditures at car dealers and repair shops, and more demand for gasoline, roads and road repairs? Vehicle registrations have averaged 34,900 per month since 1991, with most months exceeding 40,000 since January 1996.

The average month-to-month growth rate has been 1.64 percent since January 1991, 7.34 percent on an annual basis. Motor-vehicle registrations will soon exceed 50,000 per month. The month-to-month increase is forecast to be 1.21 percent through the end of the decade, with the annual rate at 8.86 percent.

Are new businesses being formed to serve the new population, capture the higher residential incomes, and provide us with and repair our vehicles? About 58,000 new businesses have been formed in the United States each month over the past 10 years, about 1,230 in Colorado.

The rate of new-business formation is increasing about 2 percent per year in the United States, about 5.4 percent in Colorado.

However, new-business formation in Colorado is forecast to slow to a 1.75 percent annual rate through the end of the decade. New businesses are being formed at an increasing rate, but the rate of increase is expected to slow.

Are we collecting more taxes from the retail sales generated by these new and existing businesses? Sales-tax collections increased 1.63 percent per quarter nationwide from 1987 through third-quarter 1996; the rate for Colorado was 2.09 percent.

The annual rate over the same period for the country was 6.12 percent; for Colorado it was 7.64 percent. The annual rate for the United States is forecast to be 4.76 percent for the rest of the decade; for Colorado it is expected to reach 8.10 percent.

Wealthier people coming to Colorado will buy more on the average than the relatively poorer people populating the rest of the nation.

Retail sales in Northern Colorado increased 9.45 percent annually from January 1987 through October 1996. This rate of increase is expected to slow to 4.77 percent through the rest of the decade.

These indicators demonstrate that fundamentals supporting the Northern Colorado economy remain strongly positive. The economy will continue to grow but at a slower pace than from 1992-1995.

John Green is a professor of economics at the University of Northern Colorado in Greeley.

Last quarter, the 1st Choice Bank/Northern Colorado Business Report Leading Economic Indicators examined the health of the Northern Colorado economy on a long-run basis, using those data series available with a two-year or longer lag.

This quarter, we examine data series available with a six-month lag. Next quarter we will examine short-run series, those available with less than a six-month lag.

The intermediate-run indicators we examine here are fundamental, measuring whether the underlying strength of the national, state and local economy is such that growth is likely to continue.

We want to know if the population in our economy is growing, whether the…

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