"Colorado's economy has picked up in recent months," Gov. John Hickenlooper said in a statement. "Our state's economy has demonstrated resilience during the downturn in the energy sector, and we are cautiously optimistic about the future."

Oil from Colorado accounts for about one out of every 50 barrels produced in the United States. Spending in the oil and gas sector declined and put some pressure on tax revenue growth early this year, though Hickenlooper said the deep contraction that started last year may have bottomed out.

The Colorado Office of State Planning and Budget said it expected revenue in the state's general fund to increase 4.4 percent in the fiscal year ending in 2017 and 5.1 percent for the fiscal year ending in 2018. The state, however, still expects a shortfall of $52.4 million, which the planning budget said it would work to close in budget requests in January.

From late 2014 to early 2016, the state's budget office said gross domestic product for Colorado's industrial sector dropped 24 percent and most of that came from the oil and gas sector. The rest of the state economy grew by 7.3 percent.

The OSPB said stability that started to emerge in mid 2016 meant the downturn for the oil and gas industry was slowing. The industry for Colorado has a small employment base, but accounts for large expenditures elsewhere and has some of the highest wages in the state.

"The large drop in spending and income in the state from the downturn in the oil and gas industry is no longer weighing on growth," the OSPB's report read. "An increase in new business formation, the source of most net new jobs, is also contributing to Colorado's improved economic growth."

British energy company BP said last week it was relocating the headquarters for its Lower 48 U.S. states division from Houston to Denver. The Downtown Denver Partnership development group said the move by BP is a testament to the city's strength. Denver, it said, boasts the seventh-most educated workforce in the country when measured against other metropolitan areas.

The OSPB's report expressed concern about the slow pace of recovery in the broader national economy and said the hawkish rate policy by the U.S. Federal Reserve could erase much of the momentum.

"Previous monetary tightening was followed by deteriorating financial conditions and a strong rise in the value of the U.S. dollar, which weighed on industrial production and global growth during 2015 and into the beginning of 2016," it said.