"This is telling us that the additional year of dealing with
COVID has created uncertainty for them," Isely said. "They
are worried about how much longer this will go on, and wonder if they
will have to worry about inflation, interest rates and finding labor
for the next 12 months."
Several factors, including a short COVID recession and $5 trillion in
federal stimulus, contributed to slowing the projected growth rate.
Isely said these factors "superheated the economy," which
will correct itself and swing back like a pendulum.
"If you pull it too far in one direction, it will correct in the
other direction," he said. "You can accelerate really fast
for a short period of time, but can't do it for a long time. The
economy corrects itself by using things like increases in prices in
order to try to slow down."
De said supply chain bottlenecks and low labor force participation
rates will impact inflation, predicted by the Federal Reserve at 3
percent. However, De said her economic models show inflation measured
by PCE (personal consumption expenditures) price index at 3-4 percent
while CPI (consumer price index) price index is at 4-6 percent.
The Confidence Index, tracking overall business confidence in KOMA,
fell last year to 72.4 percent, due in part, Isely said, to
uncertainty, inflation and supply chain issues.
Other findings from the Grand Rapids Economic Forecast 2022:
Employment is expected to grow by 2.6% to 3.2%, showing similar
growth to 2021
Wages are expected to increase by 4.4% - 5.2%
Prices are expected to increase by 5.9% - 7.3%
The Forecast Business Confidence Index for 2022 is 70.5%, showing
reduced expectations.
The full article is posted online at https://www.gvsu.edu/seidman/sbr2022.
