Colorado business leaders reported a steep drop in confidence as a wait-and-see attitude on the direction of a second Trump administration shifted to fears of policy turmoil, new tariffs and a softer economy, according to a quarterly survey from the University of Colorado Boulder Leeds School of Business.
The Leeds Business Confidence Index measures expectations for industry sales, profits, hiring and investments, as well as the outlook of business leaders for the Colorado and U.S. economies in the upcoming two quarters. A score above 50 suggests plans to expand or a positive outlook, while one below 50 suggests a more cautious approach or negative outlook.
Expectations in the fourth quarter for the first quarter had edged higher, from 46.7 to 50, as neutral as the index can get and reflective of a balanced approach. But once business leaders had a better sense of the new agenda, it plunged to 31.9 for the second quarter and 32.2 for the third quarter.
“There is a lot of uncertainty out there on the impacts of tariffs and the restructuring of the federal government,” said Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, during a news call Tuesday morning to discuss the index.
The drop in business confidence was the second largest measured in 23 years of surveys, surpassed only by the unexpected breakout of COVID-19 and the lockdowns of 2020. The index is now slightly above levels reached during the past two recessions.
Unlike those shocks, resulting from a housing crisis and a global pandemic, the current downturn is tied to policy uncertainty within an otherwise strong economy.
“Uncertainty is the shock. One of the risks is how businesses could respond to it,” said Richard Wobbekind,an associate dean and senior economist at the Leeds School of Business. If consumers and businesses cut spending, then the worries could become self-fulfilling. But the situation remains fluid and if certainty is restored, then sentiment could rebound.
Why such a dramatic swing? A total of 218 panelists responded to the quarterly survey between March 3-20 when tariff threats were making headlines, federal employment was being cut and long-standing global alliances were being shaken up. Of that group, 190 provided open-ended answers on what most concerned them.
The largest worry, mentioned by 35.8% of respondents, was the new administration. Tariffs were mentioned by about a quarter of those responding and economic uncertainty by about 15%.
The Conference Board’s Consumer Confidence Index is also trending lower, down the past four months and reaching its lowest levels in 12 years.
Consumers express worries that tariffs will kick off another round of inflation, which they expect to reach 6.2%. They have dialed back their expectations for stock market gains and more consumers plan to cut back spending to prepare for a downturn.
Among the business executives surveyed, the biggest drop came in expectations for the U.S. economy, which fell from 50.3 to 25.9, followed by the outlook for the Colorado economy, which fell from 50.1 to 28.1 in the second quarter. In three months, the stance has moved from neutral to recessionary.
Businesses were a little more hopeful that industry sales and profits would hold up, but even those measures were in contractionary territory at 37.3 and 35.2.
“They (consumers) have told us about their uncertainty, their concerns. Sometimes behavior matches those expectations, and sometimes, it doesn’t match,” Lewandowski said.
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