GVSU expert: West Michigan economic recovery continues to flatten

Pent-up supply demand has been satisfied causing the West Michigan economic recovery to continue to flatten, said Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.

“Our index of business improvement came in at +8,” said Long. “The pent-up demand has been satisfied, but supply chain constraints are holding back further progress.”

There is no end in sight for the on-going computer chip shortage, said Long, and automotive customers, dealers and manufacturers are all growing increasingly frustrated. 

“The auto industry continues to be stymied by the shortage of computer chips, resulting in reduced production schedules affecting local auto suppliers. Some experts believe this crisis could extend for another full year,” he said.

Employers continue to experience a shortage of workers. Long said there are a record number of job postings in West Michigan and across the country. “We have to get people who dropped out of the workforce back to work,” he said.

Highlights of Long’s September report are below. The full report includes local statistics.

• The Index of Employment remained positive, and rose to +27 from +19. It would be stronger if there were more people to hire.  
• Bad news for the widely publicized chip shortage. There is no end in sight for the chip shortage. Tech companies are reluctant to add capacity for the types of chips needed for automotive. Because of the chip shortage, auto sales have fallen to levels last seen in the Great Recession. 
• The production index has turned slightly negative (-1) for the first time in 14 months.
• To attract new employees, about a third of all firms have raised their starting wage. Others are offering signing bonuses to avoid getting locked in to higher wages. Some economists are concerned we could be developing a wage-price spiral leading to cost-push inflation.  

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." 

For more information, contact Brian Long at (269) 870-0428.