Worries in West Michigan: Can It Last?

How Long Can The Auto Industry Power Michigan's Economy?

The greater Grand Rapids industrial economy is experiencing modest but slightly slower growth, according to the results of a monthly survey compiled by Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University and released June 4, 2012.

Unemployment numbers are better. “In Kent County, we were at 9.7 percent just three years ago. Now we are down to 6.1 percent,” Long said. “These are not seasonally adjusted, but this is closer to where the real unemployment number is right now.”

The survey results are based on data collected during the last two weeks of May. The survey’s index of business improvement, called new orders, moderated to +20 from +24. The production index eased considerably to +5 from +25 and employment tapered off to +12 from +20.

Long said staff reductions were reported by 13 percent of local businesses. “Some firms are starting to liquidate the inventories they built over the past six months in anticipation of higher prices.” “Overall, our current statistics are still positive, but slightly less robust than what we would like to see. Even though the local economy is still growing, the future is starting to look less certain than it did a few months ago.”

Long said automotive parts producers should keep statistics positive for a few more months and the office furniture business remains soft, but there are signs several firms are stabilizing. He said business conditions remain positive for industrial distributors and the performance for capital equipment firms remains stable because of the uptick in the automotive industry. 

However, he also said that at some point the auto industry, which has carried the local economy, is going to reach a saturation point. “Supply is going to catch up with demand and given that so much of our rebound has been so based on automotive, I am afraid our numbers will not continue to be as robust as we have seen over the last three years”

Here is another concern: Many of us are simply confused. “Consumer confidence in both of the major surveys is still running far, far below what is what six years ago. We have a long way to come back to that level of consumer confidence.”

The Institute for Supply Management survey is a monthly survey of business conditions that includes 45 purchasing managers in the greater Grand Rapids area and 25 in Kalamazoo. The respondents are from the region’s major industrial manufacturers, distributors and industrial service organizations. It is patterned after a nationwide survey conducted by the Institute for Supply Management. Each month, the respondents are asked to rate eight factors as “same,” “up” or “down.” An expanded version of this report and details of the methodology used to compile it are available at www.gvsu.edu/scblogistics.org.