For two years, state business leaders reported feeling pessimistic about the direction of Colorado’s economy.

It started when inflation was high. And to tame it, the Federal Reserve raised interest rates making it more costly to borrow money for business loans or mortgages.

But for the first time since 2022, business confidence in the state turned positive, according to the Leeds Business Confidence Index — a measurement of Colorado business leader’s economic sentiment from the University of Colorado Boulder released Tuesday.

Going into the second quarter of the year, the index jumped above a score of 50, the neutral baseline, to nearly 54.

In Q1, the Leeds Business Confidence Index stood at 45.

“I was somewhat surprised that it remained so negative for so long,” said Brian Lewandowski, executive director of the Business Research Division at the Leeds School of Business, in a Tuesday news conference.

Fears of a recession dominated headlines last year with warning signs in the economy from low consumer confidence, high inflation and a tighter lending environment.

For months, the labor market stayed strong and Colorado outperformed expectations. Yet, Lewandowski said, sentiments didn’t match the reality economists were finding.

“What we’re seeing now is people are starting to believe that it is actually doing pretty well,” he said.

Businesses are switching camps from a recessionary mindset to a “soft landing” as the economy comes down from the pandemic rebound. The Federal Reserve signaled it could cut interest rates, contributing to leaders improving their outlook, according to the economist.

The index measures business sentiments across six categories: state economy, national economy, sales, profits, hiring and capital investments. All saw a boost of optimism in Q2.

Nearly 180 business leaders surveyed between March 1 through March 20 reported the highest confidence in sales and the lowest in hiring, according to the CU Leeds School of Business.

Sales and profits had the biggest spike in confidence going into Q2. The sales index jumped nearly 12 points into the positive territory with a score of 57.

About 44% of respondents said they have a positive outlook on sales, the survey found, outnumbering the 16% with negative expectations. Nearly 40% were neutral.

Business leaders have higher faith in the state economy than the U.S. and the gap is widening as leaders expect Colorado to outperform the national average.

The narrative is changing, said Adam Sands, market president at FirstBank of Cherry Creek at a neighborhood panel Tuesday talking about financing development.

“Lenders do want to lend,” he said.

Six months ago, Sands said he would have avoided talking about the lending environment publicly. But now FirstBank is looking into funding several Cherry Creek developments — an area outperforming downtown Denver — starting in 2025.

“It’s about buying in the right deal,” Sands said.

Colorado’s economy started the year on a better foundation, according to an earlier report from CU Boulder and the Secretary of State. The national gross domestic product at the end of 2023 was higher than expected thanks to a boost in holiday shopping, affirming consumers are still spending.

Inflation in the Denver-Aurora-Lakewood metro area was up 3.5% year-over-year in January, according to the Bureau of Labor Statistics, higher than the national average of 3.1%.

The metro area’s inflation is expected to stay above 3% throughout 2024, according to the university’s economic forecasters.

Still, businesses reported their top concerns were the general economy, politics from new regulations to an upcoming presidential election, high interest rates, inflation and the labor market.

There was an even split between positive and negative responses for the general economy, political environment and interest rates, Lewandowski said.

And there is still high uncertainty in the market.

“You have people looking at the sort of same situation and interpreting it differently,” he said.