Current Business Trends: Moderation

Brian Long
Brian Long
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GRAND RAPIDS, Mich. -- The greater Grand Rapids economy remains in positive territory but the pace of improvement has slowed, according to a survey compiled by Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.                                    

Results of the survey, conducted the last two weeks of November show that the index of new orders — which tracks business improvement — backtracked to +10 from last month's +36. Similarly, the production index remained positive, but eased to +16 from last month's +29. Activity in the purchasing offices came in at +10, down from +21. The employment index slid to -5, down from +17.

"All in all, most of our statistics continue to be positive, but the pace has clearly slowed," Long said. "Since we are now in our eighth month of the current recovery, it is not surprising to see a month of moderation. Although this trend may continue into December, the beginning of 2010 still looks positive." 
    
Long said the office furniture business has stabilized, but only one firm reported significantly better business conditions, adding that "the real recovery for this industry has yet to arrive."  For auto parts suppliers, Long said the Cash for Clunkers surge appears to have run its course, although better business conditions for GM and Ford have helped to stabilize the market.

Long said he expects the recovery will continue as 2010 begins, barring some unforeseen event. "Contrary to some of the financial pessimists on television, there is no evidence to suggest that this recession will have a second leg to it," he said. "For Michigan, the recovery will be helped by a partial recovery of the auto industry."
   
The housing market "will continue to be an economic wet blanket for the entire nation," Long said, though he noted that the situation is much worse on the east side of the state.

One of the big questions is the State of Michigan budget, which has seen a drop in revenues from almost every source. "Although the budget is now in place for fiscal 2010, the expected shortfall for 2011 is about $20 million dollars. This will put pressure on all government services, from repairing roads to schools to social services. It will take many, many years for these revenues to come back," Long said.

AUDIO CLIPS
 

  • Long says a stable November indicates good news going into 2010. (AUDIO)
  • Long says he's optimistic about a continued recovery for Michigan in 2010. (AUDIO)
  • Long says the auto industry has stabilized and the cash for clunkers program did help. (AUDIO)
  • Long says the furniture industry has also stabilized but is still waiting for a turn-around. (AUDIO)

The Institute for Supply Management, Greater Grand Rapids 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 purchasing managers from the region's major industrial manufacturers, distributors, and industrial service organizations. It is patterned after a nationwide survey conduced 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.

MEDIA: Call Brian J. Bowe at (616) 331-2221 or e-mail boweb@gvsu.edu to arrange interviews with Long.