After rough finish in ’04, signs of growth emerge

The Northern Colorado Business Report Index of Leading Indicators indicates that the Northern Colorado economy had a rough quarter to finish 2004. The October, November and December indicators of economic growth were all solidly in negative territory, signaling three months of economic consolidation. This period of consolidation was not as long, or as strong, as the eight-month period of contraction in late 2002 and early 2003, but comes close enough on the heels of that contraction to demonstrate that the nearly uninterrupted growth of the 1990s is over. The Northern Colorado economy is maturing and is now subject to more frequent growth cycles.
The construction boom at the Interstate 25-U.S. Highway 34 interchange is pulling the local economy out of the doldrums as 2005 dawns. The value of construction put in place in January increased 118 percent over January 2004, a consolidated growth rate of u p to 10 percent for the month, well into positive territory. The I-25-U.S. 34 interchange has become a new “center of energy” for the Northern Colorado economy. It is being driven by a new “competitive sector” of health care industries.
The Northern Colorado economy will be affected by, but not pulled down by, the coming contraction in the national economy. My national forecast still sees contraction late in 2005, brought on by the large, continuing national deficit and the growing reluctance of foreign central banks to finance that deficit. South Korea’s recent pronouncement is merely the first of several to come. Interest rates in the United States will rise, causing a slowdown in the national economy.
Employment data in Colorado (all counties) is being “rebenchmarked” by the state. January data indicates that Northern Colorado employment will be reestimated upward, a normal process for growing economies. Some employment data must be estimated because not all businesses report employment to the state each month. These estimates are made on the basis of historic ratios that tend to cause underestimates in growing economies and overestimates in contracting economies. This will also probably cause unemployment numbers to be lower.
The total value of construction being put into place in Northern Colorado is increasing at its fastest pace since at least 1988 when I started recording local F. W. Dodge statistics. As I have stated many times in the past, employment growth is the trigger but construction is the driver of the local economy. The trend line for construction value now has its steepest slope ever in my recorded numbers.
The type of construction driving our economy, however, has shifted from single-family housing to commercial construction; the shopping centers and commercial buildings being erected at the I-25-U.S. 34 interchange and elsewhere around Northern Colorado. As this round of commercial construction wanes, however, residential construction will resume its dominance as the new workers and retired persons demand housing. Higher interest rates will temper this demand. In addition, the new, lower-income workers and retired persons will purchase cheaper housing, thus slowing the growth in the value of single-family housing.
The rate of increase in new motor vehicle registrations has slowed because of a slowdown in new car sales and employment growth, giving us a chance to catch up on road building and maintenance.
New sales tax accounts being issued are very weak; the trend line is declining. It will, however, probably turn back up as the new shopping centers come on line and medical service businesses proliferate.
The value of retail sales continues to grow at a steady rate. We can expect a big jump as the new retail businesses in the new shopping centers begin to report their sales sometime later in 2005. The I-25-U.S. 34 interchange will become an even bigger magnet for regional shoppers from Wyoming and Nebraska.
Bankruptcy legislation has passed Congress and will be signed by President Bush. This will make it harder for individuals to declare bankruptcy by shifting more bankruptcy declarations from Chapter 7 to Chapter 13, a move that will make individuals liable for working off part of their debts over a period of time. There will be a flurry of bankruptcy declarations to beat the effective date of the new legislation and a lull in declarations after the new law goes into effect, thus distorting the statistics and their effect on growth in the Northern Colorado economy.
Thus, the Northern Colorado economy will continue to grow, no matter what happens to the U.S. economy. Employment and the type of employment we create will make a difference and we will see shifts in the type of construction that drives our economy. Other effects will be caused by legislation and financial moves in the international money marketplace.

John W. Green is a regional economist who compiles The Northern Colorado Business Report’s Index of Leading Economic Indicators. Green, a Fort Collins resident, was previously chairman of the University of Northern Colorado economics department.

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