CU business confidence index: Worries about cold weather and election, but optimism into 2021

BOULDER — Industry leaders in Colorado were slightly more bullish heading into the final quarter of 2020 than they were earlier this year but aren’t as confident heading into the colder months as they were during the summer.

The quarterly report and survey from the University of Colorado Boulder Leeds School of Business puts the overall index at 47.9, whereas a 50 indicates a purely neutral outlook. That’s a 3.6 percentage-point increase from last quarter’s index rating of 44.3.

The increase was buoyed by higher confidence rankings across the survey’s six components, with gains of four to six points in the industry profits, hiring and capital expenditures sections and gains of between one to two points in confidence in the state and national economy.

The fourth quarter’s overall confidence figure improved from the third quarter of the year, when the index sat at 44.3, and from the second quarter of this year, when mass stay-at-home orders and a sudden and massive wave of unemployment brought the confidence index to the lowest it had ever been at 29.7.

In a call with reporters Thursday morning, Brian Lewandowski, executive director of the Leeds School’s Business Research Division, said sentiment for this coming final quarter of 2020 was down compared with when survey respondents were asked about their confidence for the year’s end during the summer.

COVID remained the main driver for the state’s economic woes, with 39% of panelists citing the pandemic as a main reason to be pessimistic. However, more worries about the outcome of the presidential election have surfaced, with about 20% of respondents noting the contest as a reason to be downbeat.

The report estimates that the index will reach 56 in the first quarter of 2021 by factoring in lasting crimps to growth due to long-term economic effects of the pandemic but also factoring in optimism that the recession will go down in history as acute but ultimately short-lived.

Delayed recovery

However, more companies represented within the survey now expect to see anything resembling pre-pandemic commerce to return later than first thought.

About half of the firms surveyed said they expect to see pre-pandemic sales and employment to return, compared with 65% of firms expecting that return to occur between the second half of this year and the first half of next, Lewandowski said.

About 41% of firms now believe that recovery will come in 2022 or beyond.

Lewandowski said that drop is partially explained by the optimism earlier in the year when Colorado was exiting a hard lockdown, but various factors such as the coming cold weather, a recent spike in state cases and other setbacks are tamping down expectations.

“I think now that we’re into the fall, businesses may not be as open as they thought they might have been at this point,” he said.

Congressional aid, or lack thereof

As of Thursday afternoon, House Speaker Nancy Pelosi (D-California) and Treasury Secretary Steven Mnuchin were still deadlocked on a $2.2 trillion pandemic relief package with just days to go before the House is due to adjourn for the final election campaign push to November.

Meanwhile, Congress failed to renew an aid package to the airline industry by Wednesday night despite warnings from major carriers that they will be forced to lay off tens of thousands of workers. 

CU-Boulder economics professor Richard Wobbekind said the survey’s signs of national economic optimism is likely tied in part to the resolution of the presidential election cycle, along with expectations that some type of stimulus package might be on the way after the election.

Whether that package would be large enough in dollar size, or come in time to save struggling firms, remains to be seen.

“It certainly, at least in my opinion, should have more small-business money, because you’re going to see a lot of business failures here in the months that are ahead,” he said.

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