Current business trends show seasonally slow growth

The greater Grand Rapids industrial economy experienced seasonally slow growth in December, but is still growing modestly, according to 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.

The survey results are based on data collected during the last two weeks of December.

The survey’s index of business improvement, called new orders, came in at +13, just slightly lower from +16 last month. The production index edged up to +19 from +12, and the employment index came in at +23, up from +16 last month.

“The main strength of the West Michigan economy continues to be automotive,” said Long. “All of our auto parts producers have reported a good 2014, and some are cautiously optimistic about 2015. The office furniture business has also contributed to a strong 2014, and most firms finished December on a positive note. As some buyers scrambled to use up their 2014 budgets, several of the capital equipment firms reported a surge in the closing days of the year. For the industrial distributors, December is often a slower month, and this December was no exception.”

Long said oil is now half the price it was in June. “There are a lot of reasons for this fall in price, but most of the drop is related to simple supply and demand,” he said. “With the shale oil boom around the world, supply has crept up. At the same time, economic weakness in Europe, as well as in other industrial countries, has reduced the demand. Higher supply, followed by lower demand, results in lower prices. It just took a while for the world to add it all up.”    

Long said prices for some of the other major commodities have been falling as well. Copper and lead are now about 15 to 20 percent lower than they were about a year ago, and iron ore is now about a third of the price of four years ago. For the last six months, zinc and rice have been falling in price. Long said if too many smelters, mines, drilling rigs, and mining equipment manufacturers are shut down, the drag on the international economy can be severe.

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.

For more information, contact Brian Long at (269) 323-2359.