Colorado Economy Slowed by Inflation, Rising Interest Rates and International Unrest – The Fort Morgan Times
Just before Russia invaded Ukraine, Colorado’s economy was expected to rebound from last year’s unsustainable pace to a slower but still above-average pace in June, according to ColoradoCast, a short-term economic forecast. from Colorado State University.
But last week’s invasion threw financial markets into turmoil, pushed up oil and natural gas prices and opened the door to the possibility of a much wider conflict. This could further weigh on an economy already struggling with inflation and higher interest rates.
“It’s unlikely but not impossible that the situation in Ukraine could lead to negative growth rates in what would begin to look like a recession,” said Phyllis Resnick, director of the Colorado Futures Center at CSU. “People are devastated by what’s happening, but it doesn’t affect the decisions they make about their daily lives in the same way COVID-19 does.”
When the first ColoradoCast was released in early December, it measured an unsustainable growth rate of around 10% per year, reflecting strong spending and hiring during a pandemic rebound. The forecast, which spans six months, predicted a slowdown in growth to 6.5% a year in April.
The second forecast, released Wednesday, called for the state’s economic growth of around 9% in January and 7.5% in February, with inflation and higher interest rates as sticking points for the economy. . By June, forecasts call for Colorado’s economic growth to slow to 4.47%, less than half the annual pace seen in December.
Given that the 20-year average of Colorado state GDP growth is 3.25% per year, a growth rate of 4.5% still represents an above-average pace, Resnick said.
ColoradoCoast, based on the Federal Reserve Bank of Philadelphia’s coincident economic activity index for Colorado, examines changes in house prices, the direction of the stock market, the spread between short and long Treasury bonds. long-term, the risk that investors see in companies bonds, initial claims for unemployment insurance and job changes by recruitment agencies.
More risk-averse bond and stock markets were signaling slower growth rates last month, but Resnick said at the time it was hard to say to what extent that reflected concerns about the government’s monetary policy tightening. the Federal Reserve and to what extent was tied to the troop. near the Ukrainian border.
One of the ways consumer spending will be affected early on is through higher prices at the pump. With a significant drop in COVID-19 cases, more employers are expected to finally call their employees back to the workplace, which could increase household costs. Higher heating bills could also strain budgets, given the need to transfer more natural gas production to Europe. But with warmer temperatures around the corner, the blow won’t be as bad as the invasion that happened in the fall.
If oil and gas prices stay high, that could benefit the state’s oil producers, offsetting some of the hit, Resnick said. And if fewer people travel to Europe, it could boost domestic travel to states like Colorado.
So many unknowns remain there. Resnick said she plans to run the model monthly rather than every three months to get a feel for what it captures.