Fred Crowley\'s Quarterly Report

$Page 1: Fred Crowley\'s Quarterly Report$
College of Business and Administration University of Colorado at Colorado Springs 1420 Austin Bluffs Parkway, PO Box 7150, Colorado Springs, CO 80933-7150

© Southern Colorado Economic Forum - Quarterly Updates and Estimates - April 2009 1

TM

Quarterly Updates and Estimates Volume 7, Number 4, April 2009

Fred Crowley - Senior Economist

Update on the El Paso County Economy

The Business Conditions Index (BCI) appears to have halted its downward trend. The BCI now stands at 69.48, up from its February value of 68.62. The nominal improvement in the BCI and its steady performance since November 2008 suggest that the local economy is likely at the bottom of the current recession. The most important measure of the area’s economic health might be employment. Since employment tends to lag the business cycle, the Forum expects several months of slow economic activity are ahead for the local economy. While some nominal variations around the emerging trend are expected, the Forum does not expect the

1 The Business Conditions Index (BCI) is a geometric index of ten seasonally adjusted data series. The El Paso County data are single family and town home permits, new car sales, employment rate, foreclosures, ES202 employment and ES202 wages and salaries. Colorado Springs data are sales and use tax collections and airport enplanements. University of Michigan’s Consumer Sentiment and the Federal Reserve Bank of Kansas City Manufacturing Index are non-local indicator in the BCI. The BCI is in-dexed to March 2001 = 100. All raw series are seasonally adjusted by UCCS Southern Colorado Economic Forum using the De-

partment of Commerce X12 adjustment process.

Business Conditions Index

El Paso County (March 2001 = 100)

60

70

80

90

100

110

120

Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09

Forum

Business

Conditio

ns In

dex

Business Conditions Index 3 Month Moving Average



TM

economy will deteriorate beyond its current position. The economy should experience a boost from the troops who returned in February and the Fort Hood troops scheduled for reassignment to Fort Carson in this summer. See the January 2009 QUE for a discussion of the military’s impact on the local economy. http://www.southerncoloradoeconomicforum.com/ The current quarter saw all BCI indicators below their respective year ago values. However, five of the ten indicators are now higher than their previous monthly values. This compares favorably with two of the ten indicators being higher than their respective December 2008 values.

COS

Enplane-

ments

El Paso

County

SF & TH

Permits

U Of

Mich Con

Sent

Kansas

City Fed

Mfg Index

El Paso

Employ-

ment Rate

Colorado

Springs

2% Sales

& Use

Tax

El Paso

County

Car

Sales

El Paso

County

Fore-

closures

El Paso

County

Employed

El Paso

County

Real

Wages BCI

Dec-07 86.56 31.12 82.31 136.40 98.50 107.58 80.40 98.30 111.41 103.77 88.44

Jan-08 93.20 35.03 81.01 150.22 98.36 107.79 88.31 98.60 112.85 103.83 91.90

Feb-08 93.12 30.85 77.06 139.76 98.30 99.40 79.50 97.85 112.97 104.42 87.96

Mar-08 90.14 28.74 75.77 138.27 97.97 104.12 71.12 97.98 113.08 104.84 86.29

Apr-08 87.24 28.47 68.75 149.48 98.09 101.79 79.27 98.05 112.65 99.33 86.01

May-08 93.34 36.69 65.54 152.09 97.82 101.78 68.99 98.42 111.47 99.10 87.23

Jun-08 85.60 23.83 60.49 147.61 97.83 110.33 76.78 97.59 109.16 98.12 83.14

Jul-08 81.95 30.58 66.09 169.28 97.68 93.81 66.95 98.13 108.40 98.57 84.26

Aug-08 84.91 20.03 68.98 146.49 97.50 103.75 63.70 98.99 108.27 98.33 80.67

Sep-08 80.47 28.26 78.38 125.56 97.42 99.18 67.74 98.94 108.36 98.03 82.93

Oct-08 86.28 17.50 65.90 99.03 96.95 93.25 58.48 97.92 108.16 103.60 75.11

Nov-08 79.98 17.29 61.41 75.11 96.99 94.39 54.37 98.21 108.47 103.31 71.51

Dec-08 79.57 16.87 66.14 76.98 96.34 91.51 57.76 98.26 107.59 101.94 72.01

Jan-09 79.02 17.92 65.64 62.78 95.86 89.24 48.83 98.17 107.00 100.35 69.34

Feb-09 78.56 17.71 61.71 59.79 95.24 90.86 49.96 97.78 106.68 99.92 68.62

Mar-09 77.37 17.50 62.31 64.65 94.99 98.11 50.07 97.94 106.14 99.10 69.48

Feb-09 -1.51% -1.19% 0.97% 8.12% -0.25% 7.99% 0.22% 0.16% -0.51% -0.82% 1.26%

Dec-08 -2.77% 3.75% -5.79% -16.02% -1.40% 7.22% -13.33% -0.32% -1.35% -2.79% -3.52%

Sep-08 -3.85% -38.06% -20.51% -48.51% -2.49% -1.07% -26.09% -1.01% -2.05% 1.09% -16.22%

Mar-08 -14.17% -39.11% -17.77% -53.24% -3.04% -5.77% -29.61% -0.04% -6.14% -5.47% -19.48%

March 2009 Compared to:

Table 1: Business Conditions Index Components - All Values Indexed to Mar 2001 = 100

Real wages in El Paso County are estimated by the Forum for the period Oct '08 through Mar '09



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Single Family Permit Trends

in El Paso County

0

100

200

300

400

500

600

Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Perm

its

Issu

ed

Seasonally Adjusted Single Family Permits 3 Mo Moving Avg SA

Source: Pikes Peak Rgl Bldg Dept, and UCCS Southern Colorado Economic Forum

Single Family-Detached

Building Permits in El Paso County

389

392

351

344

305

317

245

215

218

188 220

221

273

136

134

180

97 108

78 9

7

69

55

43 6

6

53 7

1

0

50

100

150

200

250

300

350

400

450

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Monthly Average: 3/05-3/08 Last 13 Months: 3/08-3/09


Single Family-Townhomes


89

113

82

55

48 52

48

45

41

41

38

47

59

32 3

7

29

28

49

25

20

8 8

17

4

24 28

0

20

40

60

80

100

120




Analysis of the El Paso County

Residential Housing Market

The Forum noted the near bottoming of single family permit activity in the 4th quarter of 2008. Evidence since then sup-ports the earlier observation. Permit activ-ity is flat to slightly up. Measurable growth is likely to elude us until late in 2009.

Permit activity remains significantly be-low its past average.

Weakness in townhome permit activity continues to characterize this less expen-sive form of home ownership in the county. Townhome permit activity is well below its past average.



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Single Family & Townhomes


478 505

433

399

353

369

293

260

258

229 258

268

331

168

171 209

125 157

103

117

77

63

60 70 77 99

0

100

200

300

400

500

600




Compared to the last several years, the most recent thirteen months of private residential building activity have remained weak. The normal rise in activity in the late spring to early summer appears to be present in 2009. A modest non-seasonally adjusted upturn can be seen in the accom-panying chart. While offering a glimmer of hope, it is not sufficient to conclude the local housing market is better.

Compared to their past year to date levels, cumulative single family permits continue to be well below their past average. This is expected to improve toward the latter part of 2009.

Multi-family permit activity finished 2008 with several large projects. Permit activ-ity was up 17.4 percent over its past an-nual average. Vacancy rates in the 10 per-cent range and declining real rents suggest no additional multi-family housing is needed at the current time except for se-lect pockets in the areas surrounding Fort Carson.

Single Family Detached Permits

in El Paso County - Year to Date Comparison

2,2

68

220 4

41

714

974

1,2

30

1,4

40

1,6

19

1,8

02

1,9

47

2,0

70

2,1

77

2,2

68

1,2

23

66 119

190

0 0 0 0 0 0 0 0 0

0

500

1,000

1,500

2,000

2,500

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Average Cumulative Permits: 2006 - 2008 Actual Permits: 2009


Multi-Family Housing Units

in El Paso County - Year to Date Comparison

386

21 40 7

1 93 109

166

284 3

28

340 358

365 386

453

12 16

17

0 0 0 0 0 0 0 0 0

0

50

100

150

200

250

300

350

400

450

500


Average Cumulative Permits: 2006 - 2008 Actual Permits: 2009




TM

Active Listings of Homes

(Pikes Peak Region)

4,6

63

4,9

57

5,3

60

5,6

42

5,8

29

5,8

56

5,7

10

5,5

20

5,1

85

4,7

22

4,8

49

4,9

81

5,3

31

5,8

49

6,1

75

6,3

96

6,5

95

6,5

44

6,3

23

6,0

30

5,8

41

5,5

47

4,9

51

4,9

25

4,9

96

5,0

79

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Mar-

08

Apr-

08

May-

08

Jun-

08

Jul-

08

Aug-

08

Sep-

08

Oct-

08

Nov-

08

Dec-

08

Jan-

09

Feb-

09

Mar-

09

Act

ive

Lis

tings

Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09

Source: Pikes Peak REALTOR Services Corp. and UCCS Southern Colorado Economic Forum

Monthly Single Family Home Sales

(Pikes Peak Region)

977

1,0

22 1,1

72

1,2

88

1,1

91

1,1

72

938

917

805

787

628

658

883

722

772 840

867

886

778

734

649

499

495

413 504 566

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

Mar-

08

Apr-

08

May-

08

Jun-

08

Jul-

08

Aug-

08

Sep-

08

Oct-

08

Nov-

08

Dec-

08

Jan-

09

Feb-

09

Mar-

09

Sin

gle

Fam

ily H

om

es S

old

Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09 Series3


MLS Activity Single family home sales in the Pikes Peak Region were down 28.5 percent from the annual average for 2005-2007. Low interest rates are helping refinancing deci-sion but have not contributed to signifi-cant home purchase activity as of yet. This is expected to change with the rising affordability of housing. In 2008, the housing affordability for El Paso County was approximately 134, up from 101 in 2006.

Home sales activity continues to struggle. The latest monthly data indicate sales are running approximately 36 percent below the past average. A number of mortgage lenders have reported increased activity from first time buyers who are eager to take advantage of the stimulus package tax credits.

The supply of single family homes for sale in the Pikes Peak Region is significantly lower than year ago figures (down 13.3% from March 2008’s historical average). March 2009 listings were approximately 8 percent below its historical three year av-erage. If this continues, the decrease in the supply of housing for sale is expected to contribute to price stability among re-sale homes over the next six to nine months.

Year to Date Sales

(Pikes Peak Region)

10,0

75

628 1,2

86

2,1

69

3,0

79 4,1

24 5,2

37 6,2

81

7,2

55

8,0

30

8,7

88

9,4

50

10,0

75

8,3

39

413 917 1,4

83

0 0 0 0 0 0 0 0 0

0

2,000

4,000

6,000

8,000

10,000

12,000

Dec-

08

Jan-

09

Feb-

09

Mar-

09

Apr-

09

May-

09

Jun-

09

Jul-

09

Aug-

09

Sep-

09

Oct-

09

Nov-

09

Dec-

09

Hom

es

Sold





TM

Average Sale Price of a Home

(Pikes Peak Region)

245,1

40

245,0

49

256,0

57

263,2

26

264,3

67

261,4

53

258,0

80

249,5

90

252,5

02

262,4

62

246,5

20

243,3

46

243,0

09

223,0

25

239,5

78

251,5

43

256,8

29

252,5

49

235,0

98

239,3

85

230,0

12

213,4

66

227,3

76

198,6

44

206,6

08

212,5

49

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Mar-

08

Apr-

08

May-

08

Jun-

08

Jul-

08

Aug-

08

Sep-

08

Oct-

08

Nov-

08

Dec-

08

Jan-

09

Feb-

09

Mar-

09

Aver

age

Pri

ce o

f H

om

es S

old

Historical Average: 3/05-3/08 Last 13 Months: 3/08-3/09


Median Sale Price of a Home

(Pikes Peak Region)

204,2

83

203,4

33

214,0

00

220,4

42

221,4

17

218,3

75

211,1

42

208,0

46

210,1

50

217,5

77

204,8

83

205,8

17

204,3

33

193,0

00

207,7

50

210,0

00

223,0

00

223,9

50

199,9

00

200,0

00

189,0

00

187,0

00

180,0

00

173,0

00

177,2

50

185,0

00

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000


Media

n P

ric

e o

f H

om

es

Sold

Historical Average: 3/05-3/08 Last Thirteen Months: 3/08-3/09


Ratio of Home Sales to Housing Units

(Indexed to Mar/Nov 2001 = 100)

0.3

0.4

0.5

0.6

0.7

0.8

Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09

Home Sales


The average price of an MLS facilitated home sale has trended down by approxi-mately 5 percent since March 2008. This supports the general consensus that the local housing market is soft. The average sales price of homes that were sold is not the same thing as the average price change for homes. A better measure is believed to be the same house resale price change from the Office of Federal Housing Enter-prise Oversight. This measure indicates housing prices declined by 1.8 percent from December 2008 to December 2009.

Median sale prices also fell over the last year. The median price decline approxi-mately 4 percent, slightly better than the 5 percent decline in average prices.

The Forum’s ratio of home sales to total single family housing units continues to demonstrate signs of stability. The index has remained in a steady range since Octo-ber 2008. A notable upward trend is not expected for at least 6 to 9 more months.



TM

Single Family Permits and Initiated Foreclosure

Proceedings in El Paso County (Seasonally Adjusted)

0

100

200

300

400

500

600


Sin

gle

Fam

ily P

erm

its

0

100

200

300

400

500

600

Foreclo

sure P

roceedin

gs

Permits Foreclosures

Source: El Paso County Public Trustee and UCCS Southern Colorado Economic Forum

Foreclosures

Permits

The Forum first pointed to the inverse re-lation between foreclosures and new sin-gle family permits at its 11th Annual Southern Colorado Economic Forum in October 2007. Evidence of the relation-ship continued through 2008. Until the problem in foreclosures is resolved, single family construction is not expected to re-bound.

El Paso County Foreclosure Proceedings

1,4

06 2

,088

3,2

40

3,4

76

2,9

73

2,3

16

1,9

92

1,0

59

590

456

431

499

664

827

959

1,0

03

1,1

63 1,5

96

1,9

54

2,2

75

2,2

73

2,5

54

3,5

56

4,6

02

4,5

00

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1985 1988 1991 1994 1997 2000 2003 2006 2009*

Annual F

ore

closu

res

Source: El Paso County Public Trustee and UCCS Southern Colorado Economic Forum

Foreclosures The number foreclosures increased sharply in 2008 as subprime and Alt A mortgage loans became more problem-atic. Evidence points to a number of homeowners with second mortgages who are upside down on their mortgages. Ad-ditional concerns exist about the rising number of unemployed workers and their ability to meet mortgage payments. De-spite these concerns, local indicators and the BCI suggest the local economy is on the verge of improvement. Foreclosures are expected to decline slightly in 2009 to 4,500.



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Last 12 Months Q3 2007 to Q3 2008



Boulder, CO 2.98% 5.85% 16.00%

Colorado Springs, CO -1.79% -1.54% 15.83%

Denver-Aurora, CO -0.70% -1.08% 6.34%

Fort Collins-Loveland, CO -0.09% 1.29% 8.19%

Grand Junction, CO 0.55% 13.62% 59.93%

Greeley, CO -7.25% -10.16% -6.58%

Pueblo, CO -0.25% -2.04% 10.75%

Colorado -0.15% 1.45% 13.89%

U.S. -4.47% -3.86% 24.79%

Housing Bubbles

The Forum has repeatedly noted that Colorado Springs should not experience a housing bubble. To date, re-sale price trends have declined less than 2 percent over the last 24 months. This is best described as a modest change in housing prices, not a burst bubble. The Office of Federal Housing Enterprise Oversight produces a housing price based on same house sales data. New homes are excluded from the index until they are resold in the market. Over the past five years, housing

prices in the Colorado Springs MSA saw the third highest appreciation in Colorado. An energy driven bub-ble drove Grand Junction prices up an unsustainable 59.93 percent over the last five years. Current evidence indicates Grand Junction is at the front end of a housing market correction. If not for Boulder’s recent modest gain in value and the slight decline in values in Colorado Springs, Colorado Springs would have had the sec-ond best housing market in Colorado over the last 5 years.



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Multi-family Market The estimated annualized multi-family vacancy rate stood at 9.65 percent for 2008. Continued new construction, the lack of job growth and the sustained de-ployment of troops from Fort Carson con-tributed to this. The Rand institute esti-mated 40 percent of the troops who live off base will rent housing. The antici-pated return of troops and additional troops under BRAC05 are expected to help reduce vacancies in 2009 provided new multi-family construction takes a sab-batical. Higher nominal rents are not expected un-til vacancies drop and inflation increases with a growing economy. Adjusting for inflation, real apartment rents were estimated to be $586 in Decem-ber 2008 compared to $658 in December 2003. Alternatively stated, landlords are collecting 10.9 percent less real revenue per rented apartment than they did five years earlier. The increase in new multi-family units and the modest increases in occupancy rates suggest real rents for multi-family units will remain weak through the next 6 to 9 months.

Nominal and Real

Apartment Rents in El Paso County

500

550

600

650

700

750

Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08

Aver

age

Month

ly R

ent

Rent NSA Inflation Adjusted Rent NSA

Source: Colorado Division of Housing, UCCS Forum

Multi-Family Vacancy Rates

in El Paso County

5.58

3.55

5.33

9.33

12.1811.18

11.9311.20

10.109.65

0

2

4

6

8

10

12

14

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Colorado Division of Housing, *= Estimated Yearly Rate

Multi-Family Rents

in El Paso County

607

645

669659

664669 674

694 699 698

560

580

600

620

640

660

680

700

720

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Colorado Division of Housing, *= Estimated Yearly Rate



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Enplanement Trends at Colorado Springs Airport

(Seasonally Adjusted)

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

100,000


Month

ly E

npla

nem

ents

Monthly Airport Enplanements

Source: Colorado Springs Airport, Prepared by UCCS Southern Colorado Economic Forum

Enplanements at Colorado Springs Airport vs Recent

Monthly Average (Seasonally Adjusted)

89,0

53

87,1

32

87,2

02

85,7

39

84,0

38

81,3

23

79,6

70

81,0

64

79,4

76

79,1

87

76,8

46

76,3

88

75,6

79

87,1

10

84,3

00

90,1

95

82,7

22

79,1

96

82,0

52

77,7

61

83,3

78

77,2

89

76,8

94

76,3

55

75,9

14

74,7

68

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09

Pass

enger E

npla

nem

ents

per M

onth



Colorado Springs Airport Enplanements

Year-to-Date Trends

1,0

16,2

67

72,1

28

141,0

63

224,5

36

303,7

62

395,1

30

492,4

38

593,7

21

692,3

29

775,4

18

861,5

46

940,3

82

1,0

16,2

67

998,3

47

62,3

06

122,3

54

197,4

21

0 0 0 0 0 0 0 0 0

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000


Monthly Average: 12/06-12/08 Actual: 1/09-12/09


Colorado Springs Airport Trends Enplanement activity continued its decline through the first quarter of 2009. This was expected, given the conditions of the economy. Strength is not expected until the economy begins its expected recovery in latter portion of 2009. A comparison of current monthly enplane-ments vs. their historical monthly average reveals the downward trend in enplane-ments has been ongoing for an extended period of time. Reduced numbers of flights, higher fuel/ticket prices last sum-mer and a global recession contributed to enplanement declines. Travel spikes asso-ciated with returning troops are expected in 2009. These are not expected to offset the generally lower trend in enplanements at the airport. The Forum repeats its expectation that monthly enplanements will continue to lag their recent past averages. At the current trend, enplanements in 2009 are expected to be 4 to 5 percent below 2008 levels.



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Colorado Springs

2% Monthly Sales Tax Collections

0

2

4

6

8

10

12

14

Feb-0

4

Jun-0

4

Oct-

04

Feb-0

5

Jun-0

5

Oct-

05

Feb-0

6

Jun-0

6

Oct-

06

Feb-0

7

Jun-0

7

Oct-

07

Feb-0

8

Jun-0

8

Oct-

08

Feb-0

9

($M

illions)

Source : C ity of Colorado Springs and UCCS Southern Colorado Economic Forum

City of Colorado Springs: Inflation Adjusted

Per Capita Sales Tax Collection (1998=100)

100.0 111.9

115.4

111.9

110.5

118.9

122.1

126.6

129.1

122.2

100.0

106.0

102.8

97.0

94.5 100.0

98.7

97.5

94.5

83.2

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Annual C

ollection (000,0

00's

)

Nominal Sales & Use Taxes Per Capita, Real Sales & Use Taxes

Source: City of Colorado Springs and UCCS Southern Colorado Economic Forum

Colorado Springs Sales Taxes The City of Colorado Springs sales tax collections peaked in 2007. The current decline reflects the recession and the on-going flight to suburbia. In order to see a correction to the tax revenue trend, the City of Colorado Springs needs to host large dollar volume retailers that require population and income densities that are not found in the area’s smaller, satellite communities. These retailers should probably be located along I25 or similar high traffic corridor. Monthly sales tax collection comparisons with the current and average for the same month over the previous three years indi-cate sales tax collections for Colorado Springs have declined steadily throughout 2008 and into 2009. Current conditions indicate the City and County will experi-ence consecutive TABOR ratchet down effects for 2008 and 2009. Per capita, real sales tax collections have been on a downward trend for the City of Colorado Springs for several years. Per capita, real, sales tax collections fell 17 percent for the City from 1999 through 2008. Additional declines are anticipated for 2009.

Sales Tax Collections City of Colorado Springs

8.1

10.4

8.3

9.4

10.5

9.9

9.7 10.1

9.5

9.1

11.5

7.7 8.0

8.0

9.5

8.4 9

.2 9.8

9.5

9.2 9.2

8.3

7.8

10.4

7.0 7.4

0

2

4

6

8

10

12

14

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Month

ly C

ollections (0

00,0

00's)

Feb/'07 - Feb/'08 Feb/'08 - Feb/'09

Source: City of Colorado Springs and UCCS Southern Colorado Economic Forum



TM

New Car Sales Trend in El Paso County

0

500

1,000

1,500

2,000

2,500

3,000

3,500


Sale

s Per

Month

Monthly New Car Sales

Source: El Paso County Clerk and Recorder MSO Report. Prepared by: UCCS Southern Colorado Economic Forum

New Car Sales in El Paso County

Year to Date Trends

21,8

60

2,0

57

3,6

65

5,5

44

7,3

89

9,2

69

11,2

00

13,0

00

15,1

44

17,0

84

18,9

87

20,4

75

21,8

60

19,2

58

1,1

94

2,1

68

3,3

17

0 0 0 0 0 0 0 0 0

0

5,000

10,000

15,000

20,000

25,000


Monthly Average: 12/06-12/08 Current 13 Months: 12/08-12/09

Source: El Paso County Clerk and Recorder MSO Report. Prepared by: UCCS Southern Colorado Economic Forum

New Car Sales Trends The downward trend in new automobile sales continued through the first quarter of 2009. New car sales in 2008 were ap-proximately 22.4 percent below their sales levels in 2004 and 32 percent below their sales levels in 2001. On a per capita basis, new car sales are doing worse than the absolute decline in car sales. Per capita new car sales have declined approximately 51 percent since March 2004 and 57 percent since March 2001. The Chapter 11 bankruptcy filing by Chrysler was expected by the Forum. GM will suffer through its own reorganization, either formal or informal. Colorado Springs will see several dealerships close as a result of the reorganizations. This is especially likely if the dealerships brands are siloed by a single domestic manufac-turer.

Monthly, Per Capita

New Vehicle Sales in El Paso County

0

1

2

3

4

5

6

Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09

Sale

s per 1

,000 P

eople

Source: El Paso County Clerk and Recorder, CO DOLA and UCCS Southern Colorado Economic Forum



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National Expectations The Federal Reserve Bank of Philadelphia February 2009 Survey of Professional Economists moved toward a more opti-mistic future than their last survey. There is concern about the economy. However, it is tempered with glimmers of light peek-ing through the clouds. The results of the survey indicate the professional econo-mists are optimistic the housing market is on the road to correction. Industrial pro-duction is also expected to rise signifi-cantly from its March 2009 level of 97.4. These upward projections are accompa-nied by increases in interest rates, a reflec-tion of expected rising aggregate demand.

Q1-09 Q2-09 Q3-09 Q4-09 Q1-10

10-Year T-Bond Rate 2.7 2.9 3.1 3.2 3.5

3-Month T-Bill Rate 0.2 0.3 0.3 0.4 0.6

AAA Corp Bond Rate 5.1 5.3 5.3 5.3 5.4

Housing Starts Annualized

Growth Rate %-46.9 1.2 39.1 39.6 39.1

Industrial Production Index 102.7 101.9 101.9 102.6 103.2

Inflation Rate % -2.7 0.8 1.7 1.8 2.0

Real GDP Growth % -5.2 -1.8 1.0 1.8 2.4

Unemployment % 7.8 8.3 8.7 8.9 9.0

Nonfarm Payroll Employment

Growth (000's)-548.4 -311.2 -202.1 -43.0 38.7

Nonfarm Payroll Employment

Growth (%)-4.8 -2.8 -1.8 -0.4 0.4

Median Probability of a

Decline in Real GDP99.0% 75.0% 45.0% 25.0% 20.0%

Mean Probability of a Decline

in Real GDP94.4% 74.0% 44.7% 29.9% 21.6%

Annualized Rate for

Recession Likelihood

Employment Growth

Misery Index Trends

(Inflation + Unemployment Rate)

0

2

4

6

8

10

12

14

Mar-

99

Mar-

00

Mar-

01

Mar-

02

Mar-

03

Mar-

04

Mar-

05

Mar-

06

Mar-

07

Mar-

08

Mar-

09

Mis

ery I

ndex

Recession Dates Misery IndexSource:

Misery Index: Past 13 Months vs. Respective

Monthly Average of Prior Three Years

7.8

6

8.0

1

7.9

5

7.8

8

8.0

3

7.8

8

7.9

7

7.7

7

7.9

8

8.1

5

8.1

8

8.0

5

8.1

19.0

8

8.9

4

9.6

8 10.5

2

11.3

0

11.7

0

11.0

4

10.1

6

7.7

7

7.2

9

7.6

3

8.3

4

8.1

2

0

2

4

6

8

10

12

14

Mar-

08

Apr-

08

May-

08

Jun-

08

Jul-

08

Aug-

08

Sep-

08

Oct-

08

Nov-

08

Dec-

08

Jan-

09

Feb-

09

Mar-

09

Mis

ery I

ndex

Monthly Avg of Prior 3 Years Last 13 Months

Source: miseryindex.us and UCCS Southern Colorado Economic Forum

Misery Index The Misery Index, a consumer economic wellness measure, (www.miseryindex.us), defines consumer discon-tent as the sum of the rate of unemployment and the rate of inflation. The lower left chart illustrates the his-torical values for the last ten years through March 2009. The rise in the Misery Index beginning in late 2007 identified the current recession correctly. The Misery Index is currently declining due to a decrease in infla-tion. The decline in inflation is attribute to falling energy and commodity prices. The current 8.5 percent na-tional unemployment rate suggests it is too soon to begin feeling good.



TM

From the Director’s Desk: Reader Feedback

By Tom Zwirlein and David Hollenbach

In the January 2009 issue of the QUE, Fred Crowley performed a hypothetical input-output analysis where a local government entity used an RFP to select a professional services sector (Implan sector 444) vendor to per-form $1,000,000 of work. The choice was between a business domiciled in El Paso County and a vendor lo-cated outside of the region. Selecting the vendor located inside the county kept all of the funds in the county (no leakage) while selection of the outside vendor “exported” 100 percent of the value of the contract out of the region. The results of the simulation showed that 20 local jobs would be lost, over $925,000 of wages went out of the county, local business profits were reduced by $125,000 and indirect business taxes were re-duced $62,000. In sum, a good deal of economic activity was “exported” to another county or region of the country. These are upper end estimates of the economic loss to a community when business is sourced out of the region. I asked David Hollenbach, Managing Partner of DSoft Technology and Senior Vice President of Veteran Engi-neering and Technology, to comment on Fred’s analysis. DSoft Technology is a locally-owned professional information technology services provider and a Forum partner. Here is what he has to say.

“Dr. Fred Crowley’s analysis in the January 2009 QUE, suggested local governments contract-ing with qualified locally-owned businesses, presented a higher value proposition to the tax-payer than the practice of contracting with non-local companies. I couldn’t agree more. The theory is that by contracting with locally-owned firms, opportunities for employment in the re-gion are increased, employing those who buy homes, automobiles, groceries, electronics, etc., and ultimately pay taxes within our community. This in turn increases the tax revenue, giving the taxing authority more resources to use for infrastructure and the public good. Moreover, the profits earned by local firms from these contracts can be plowed back into local banks, churches, the library district, arts, education, charitable organizations, local corporate infrastructure, and also used to create more local area jobs. Anyone who doesn’t know the power of revenue and profit staying local within our community, fails to see the benefits to es-tablished corporate headquarters communities like Cincinnati, Chicago, Redmond, and Austin. When I hear and read the many calls to raise our taxes, to support measures to help our local government, I also know that the local business community would get behind these measures if local government got behind us. Dr. Crowley says that “…for every direct job generated from a million dollars in professional service contracts to local businesses, approximately 1.73 additional jobs would be expected in the local community. None of these would take place if the consulting contract is sent out of the community.” This basic concept has been lost on our local government leaders. Perhaps there’s a feeling that unless we get a firm in from California to assist us with ideas on how to renovate Memorial Park, the ideas we’d get from a local firm are somehow less sophisticated, less sexy. Unless you’ve tried to compete for local contracts, you wouldn’t know there is an unwritten bias against smaller local firms in comparison to the big name agencies in other locales. For instance, the four companies selected for El Paso County’s preferred information technology provider are all headquartered outside El Paso County and some are outside the state. The



TM

County’s legal counsel is a law firm from Denver. The web site for the Colorado Springs Air-port was developed by a company in Oregon and the wall space for the airport is sold by a mar-keting firm in Pennsylvania! While I’ll be the first to admit we live in a national and interna-tional economy, I disagree that outsourcing projects out of the area is always a good idea – par-ticularly when top-notch expertise lies right here in our own community. My premise is that citizens want the best value from the tax dollars they pay to the government. Local governments should look for the best value in their procurement system. None of us want poor quality companies doing poor quality work for us, even if they are local! But, local governments can make it easier for good locally based companies to win procurements by re-ducing the paperwork, costs and requirements needed to win projects. An outreach to introduce the government to local business would be an easy first step. Eliminating the duplicative, costly proposal volumes and making it easier for local small businesses to compete for work is an-other. Providing a preference for pre-qualified local businesses is just another option. All this for little to no cost, but large potential benefit to the region. I’ve proposed these ideas to several state and local lawmakers. Some recognize this as a win-win for the local taxpayer, but are powerless to make it happen. Some recognize it as a positive program called ABC (Always Buy Colorado) which helped to benefit Colorado-based busi-nesses in the 1980s and 90s. Others claim that this would create an anti-business climate else-where because Colorado Springs-based firms couldn’t compete in other municipalities as they would enact similar legislation to support their local businesses. I guess they’ve never tried to compete in Denver, Chicago, Texas, or Salt Lake City! Isn’t it time that common sense policies be enacted to support locally-owned companies? Keep taxpayer revenue here and promote new jobs, reinvestment in the community, and a stronger community-business climate. My analysis says that it is in the best interest of the community to

use local services whenever possible.” David Hollenbach is a managing partner at DSoft Technology, a Microsoft Certified Gold Partner. DSoft Technology is one of only four Microsoft Certified Gold Partners headquar-tered in Colorado Springs and one of fewer than 50 headquartered in Colorado. DSoft Technology has been supporting federal, state and local government, and commercial and ministry clients in the region for 15+ years. DSoft Technology is headquartered in Colo-rado Springs and uses locally-owned services companies and providers whenever possible.



TM

Save the Date

Thirteenth Annual Southern Colorado Economic Forum

When: October 30, 2009

Where: Antlers Hilton Hotel

Format: Town Hall Q&A on the economy

Time: 7:00AM to Noon

Preliminary Agenda

7:00 Registration

7:30 Opening remarks

7:45 Keynote speaker

8:25 The Colorado Springs economy

9:05 Panelists and Q&A

9:45 Break

10:00 Town Hall Meeting:

The Future of Colorado Springs

and El Paso County



TM

National Quarterly Data

2008

Q2

2008

Q3

2008

Q4

2009

Q1

Vs Year

Ago

T tl Loans/Lease Charge-off Rate 1.27 1.50 1.89 na 1.14

Loan Delinquency Rate 3.36 3.72 4.59 na 2.15

Benefit Costs SA 2005=100 106.9 107.5 107.9 na 2.10

Compensation Costs SA 2005=100 107.9 108.6 109.1 na 2.60

Retail Sales SA (billions) 1,049 1,021 980 na -92.0

e-Sales SA (billions) 32.5 31.6 37.1 na -1.9

e-Sales as % of Retail Sales SA 3.1% 3.1% 3.8% na 0.1%

GDP Real % Growth (Chained) SA 2.8% -0.5% -3.8% -6.1% -5.9%

Consumer Debt to Disposable Inc 13.8% 13.9% 13.9% na -0.4%

National Monthly Data Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09

Vs Year

Ago

Capacity Utilization SA 79.2 78.9 78.7 78.6 77.6 74.5 75.4 74.5 72.8 71.3 70.3 69.3 -10.50

Car & Lt T rk Sales Millions SA 14.5 14.2 13.6 12.5 13.7 12.5 10.5 10.1 10.3 9.5 9.1 9.8 -5.20

Consumer Sentiment (1966=100) SA 62.6 59.8 56.4 61.2 63.0 70.3 57.6 55.3 60.1 61.2 56.3 57.3 -12.20

CPI-U 1982-84=100 SA 214.0 215.0 217.0 218.6 218.6 218.7 216.9 213.3 211.6 212.2 213.0 212.7 -0.45%

Federal Funds Rate (Effective) 2.28% 1.98% 2.00% 2.01% 2.00% 1.81% 0.97% 0.39% 0.16% 0.15% 0.22% 0.18% -2.43%

Industrial Production (1997=100) SA 111.0 110.7 110.4 110.4 109.2 104.8 106.2 104.8 102.5 100.3 98.8 97.4 -14.27

Inventory/Sales Ratio SA 1.26 1.26 1.25 1.26 1.29 1.31 1.36 1.42 1.45 1.45 1.43 na 0.16

30 Year Convential Mtg Rate NSA 5.92% 6.04% 6.32% 6.43% 6.48% 6.04% 6.20% 6.09% 5.33% 5.06% 5.13% 5.00% -0.97%

Prime Rate (%) NSA 5.24 5.00 5.00 5.00 5.00 5.00 4.56 4.00 3.61 3.25 3.25 3.25 -2.41

Purch Mgr Index SA 48.60 49.30 49.50 49.50 49.30 43.40 38.70 36.60 32.90 35.60 35.80 36.30 -12.70

Real Rtl/Food Svc Sales SA (billions) 177.94 178.46 176.96 174.55 173.38 170.59 166.12 164.95 161.17 163.69 163.54 161.90 -16.03

S&P500 1,386 1,400 1,280 1,267 1,283 1,165 969 896 903 826 735 798 -524.83

Tech Index SA - Mar 2001 = 100 110.6 113.5 113.5 111.4 110.8 109.2 106.4 108.9 104.3 101.3 104.1 na -6.84

Trade Weighted Dollar 70.5 70.7 71.4 70.9 74.1 75.5 80.4 82.7 80.7 81.0 83.1 83.8 13.52

West Texas Oil Spot Price NSA 112.6 125.4 133.9 133.4 116.6 103.9 76.7 57.4 41.0 41.7 39.2 48.0 -$57.58

Colorado Data Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09

Vs Year

Ago

Denver-Boulder CPI SA - - 208.74 - - - - - 211.07 - - - 2.57%

Kansas City Fed Mfg Index 149.5 152.1 147.6 169.3 146.5 125.6 99.0 75.1 77.0 62.8 59.8 64.6 -73.6

Labor Force NSA (000's) 2,710 2,715 2,752 2,757 2,750 2,746 2,752 2,736 2,732 2,723 2,714 2,706 0.11

Labor Force SA (000's) 2,725 2,726 2,727 2,727 2,731 2,731 2,732 2,733 2,738 2,740 2,742 2,751 28.46

Employment NSA (000's) 2,596 2,593 2,614 2,621 2,614 2,614 2,612 2,588 2,567 2,527 2,508 2,493 -85.44

Employment SA (000's) 2,598 2,598 2,596 2,597 2,597 2,597 2,595 2,593 2,591 2,556 2,535 2,522 -75.25

Unemployment Rate NSA 4.2% 4.5% 5.0% 4.9% 4.9% 4.8% 5.1% 5.4% 6.0% 7.2% 7.6% 7.9% 3.16%

Unemployment Rate SA 4.7% 4.7% 4.8% 4.9% 4.9% 5.0% 5.3% 5.4% 5.8% 6.6% 7.2% 7.5% 2.90%

Colorado Springs Data Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09

Vs Year

Ago

Business Conditions Index SA 86.01 87.23 83.14 84.26 80.67 82.93 75.11 71.51 72.01 69.34 68.62 69.48 -16.80

Co Spgs Airport Boardings SA 84,300 90,195 82,722 79,196 82,052 77,761 83,378 77,289 76,894 76,355 75,914 74,768 -12,342

Foreclosures SA 409 353 477 397 269 276 429 386 379 393 452 428 10

New Car Sales SA 1,832 1,594 1,775 1,547 1,472 1,565 1,351 1,257 1,335 1,129 1,155 1,157 -487

Sales & Use Tax SA (000's) 9,997 9,996 10,835 9,214 10,190 9,740 9,158 9,270 8,987 8,765 8,923 9,636 -590

Single Family Permits SA 135 174 113 145 95 134 83 82 80 85 84 83 -53

Labor Force NSA (000's) 301.4 302.5 305.2 302.9 302.1 301.0 302.3 302.2 300.7 299.3 299.0 297.7 -3.82

Employment NSA (000's) 286.3 286.7 287.2 285.2 284.6 284.0 284.3 283.4 279.7 274.8 273.7 272.1 -12.45

Unemployment Rate NSA 5.0% 5.2% 5.9% 5.9% 5.8% 5.7% 6.0% 6.2% 7.0% 8.2% 8.4% 8.6% 2.97%

Unemployment Rate SA 5.3% 5.6% 5.6% 5.7% 5.9% 6.0% 6.4% 6.4% 7.0% 7.5% 8.1% 8.3% 2.87%

Table 2: Selected Economic Indicators



TM

A special thanks to the Forum’s partners for their

continuing financial support.

Platinum Level Colorado Springs Business Journal

First Business Brokers, LTD.

The Gazette

Holland and Hart

Quality Community Group

University of Colorado at Colorado Springs

Wells Fargo

Gold Level Colorado Springs Utilities

Fittje Brothers Printing

LaPlata Communities

Silver Level BiggsKofford Certified Public Accountants

Colorado Lending Source

Ent Federal Credit Union

Strategic Financial Partners

Sustaining Level Academy Bank

Adams Bank & Trust

ADD STAFF, Inc.

Air Academy Federal Credit Union

Antlers Hilton Hotel

Classic Companies

Colorado Springs Credit Union

Ditz Brothers

DSoft Technology

Executive Programs, University of Colorado

Griffis Blessing

Legacy Bank

Nunn Construction

Peoples National Bank

Salzman Real Estate Services, LTD

Sierra Commercial Real Estate

The Mail Room, Inc.

Transit Mix Concrete Company

UMB Bank

US Bank

Forum sponsorship is available at a number of levels

and benefits. Contact Tom Zwirlein at (719) 255-3241

or [email protected] for information.

About the Forum The Southern Colorado Economic Forum (SCEF) is part of the College of Business outreach to the Colorado Springs Community. The Forum gathers, analyzes and disseminates information relevant to the economic health of the region. Through its efforts, the Forum has gathered a number of unique data sets. The Forum and its staff are available for fee-for-service work to analyze business situations, develop forecasts, conduct and analyze surveys and develop solutions to other business problems you may have. Examples of prior work include Small Area Forecast for the Pikes Peak Area Council of Governments, Colorado Springs Airport Passenger Survey, exit survey for La-Z-Boy, and a Community Audit for the Pikes Peak Workforce Center. If you would like additional information about how the Forum can assist you, contact Fred Crowley at (719) 255-3531 or e-mail at [email protected]. The QUE is available free via an electronic subscription. If you would like a subscription, send an e-mail to [email protected] and have the word SUBSCRIBE as the subject.

Previous issues are available at: www.southerncoloradoeconomicforum.com

Quarterly Updates and Estimates is a publication of the

Southern Colorado Economic Forum University of Colorado at Colorado Springs College of Business and Administration

1420 Austin Bluffs Parkway P.O. Box 7150

Colorado Springs, CO 80933-7150

College of Business Venkat Reddy, Ph.D., Dean

Faculty Director

Southern Colorado Economic Forum Professor of Finance Tom Zwirlein, Ph.D.

Associate Director Senior Economist

Southern Colorado Economic Forum Fred Crowley, Ph.D.

Fred Crowley\'s Quarterly Report

Business

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