Colorado Economic Performance Forecast: 2002 and 2003

Introduction

Executive Summary

• State Gross Product declined from a range of 7 to 10 percent to a range of 2.5 to 3.5 percent.
• Slowing population growth (50 percent of average) about one-sixth the rate of 2000.
• Net job loss of about 37,000 jobs between 2002 and 2003.
• Modest decline in retail sales for fiscal year 2002, with slight growth for current fiscal year.
• Little change in revenues generated from sales, use and income taxes for 2002 and 2003 fiscal years.

State Gross Product

The declining overall growth of Colorado's Gross Product can be primarily attributed to weakness in the Financial and Insurance, Services, and Construction sectors. The following table compares the 10 year average growth rates for each sector with the forecasted growth rates for 2002 and 2003.

Despite this slowing growth, forecast models point to a general improvement toward the latter half of 2003.

Population and Employment

This analysis examined annual growth rates for population and employment as well as monthly growth of employment. The following table shows population annual growth rates for 1998 through 2003.

Not surprisingly the population growth rate is forecasted to decline in much the same way that gross product is forecasted to decline. Historic trends point to a "normal" annual growth rate for Colorado of about 2 percent. Forecast models predict declining population growth through mid-2003, which will result in 2003 population growth of about 50 percent of normal.

S K Enterprises analysts examined two sets of employment data: 1) annual employment by industry, and 2) monthly civilian, non-farm employment. The following table shows annual rates of growth for employment by industry for 2001 through 2003.

Total employment for Colorado will decline by about 0.66 percent in 2002, and 0.57 percent in 2003, which correspond to approximately 20,000 and 17,000 lost jobs respectively. Much of the weakness in employment is coming from manufacturing, wholesale trade and construction. These industries are forecasted to lose approximately 22,000 jobs in 2003.

Forecasts for monthly civilian, non-farm employment look similar. The following table shows monthly civilian, non-farm employment levels for 2000 through 2003..

Retail Sales

S K Enterprises forecast of retail sales is shown as annual growth rates by business class for fiscal years 1999 through 2003, and monthly totals for 2000 through 2003. The following table shows annual growth rates by business class.

The forecast for Colorado retail sales for fiscal year 2002 is for a slight decline (just under one-half percent). Retail sales for the current fiscal year (2003) are expected to rise about one-quarter percent. The weakest areas are wholesale trade, manufacturing and services.

The monthly forecasts show a significant improvement in the latter half of 1993, with a growth rate of slightly over 5 percent for the July to December period (2.83 percent 2003 over 2002). However, it should be noted that the annual growth for this period from 2001 would only be slightly more than 2.5 percent, which is still significantly below the average growth throughout the 1990's.

Sales and Use Taxes

This analysis examined annual sales and use taxes for Colorado. Econometric models were used to provide forecasts for fiscal years 2002 and 2003. The following table shows historic and forecasted sales taxes for the period 1992 through 2003 along with corresponding annual rates of growth.

As the table shows, after enjoying robust growth in sales tax revenue over the past 9 years, growth in 2002 is expected to slow to around two-thirds percent per year. Revenues from sales taxes are predicted to fall nearly 2 percent in 2003. Results for use taxes, which are shown below, show little growth for 2002 and 2003 fiscal years. The following table shows combined consumer and retail use taxes for 1992 through 2003 with annual growth rates.

Income Taxes

S K Enterprises examined annual net income taxes collected. The following table shows historic and forecasted net income taxes collected for individuals, corporations and total along with their corresponding annual growth rates.

This table shows that the forecast models indicate another tough fiscal year for Colorado's revenue collections with income taxes expected to fall another 1.5 percent in 2003 in addition to the 1 percent decline expected for 2002.

Summary

The preceding discussion has pointed to continuing weakness for Colorado's economy for both 2002 and 2003. Growth in state gross product, while still positive, is quite low. Colorado is no longer enjoying significant population growth, which indicates that the Colorado is no longer attracting as many immigrants as it did over the past few years. Job creation is similarly depressed and net job losses are expected to continue through much of 2003. Retail sales, an indicator of overall economic health, does not show signs of picking up appreciably until mid-2003, with the fiscal year 2002 showing a decline of about one-half percent with very slight growth for the current fiscal year. State revenues examined, sales and use taxes, and income taxes accounted for nearly 73 percent of Colorado's revenue for the 2001 fiscal year. Forecast models indicate consecutive small declines in these revenues for both the 2002 and 2003 fiscal years. The conclusion would be that Colorado will continue to suffer some economic hardship throughout the current fiscal year, with Colorado's economy lagging behind that of the country as a whole.