West Michigan’s economy has flattened, following a national and worldwide trend, according to a report released Monday by Brian G. Long, director of Supply Management Research at Grand Valley’s Seidman College of Business.
So, is the nation in a recession?
Long said he’s not quite ready to say so, given the complexities that go into determining when a recession begins or ends. However, he does think the nation is “very likely to slide into an official recession in the near future.”
“I’m sticking with an 80 percent likelihood of recession right now because, the future being what it is, things could change,” he said. “There’s a possibility that we might skate by, but it’s growing increasingly unlikely as time goes by.”
The key sales index, indicating new orders, sank into negative territory, according to the results of the survey of West Michigan manufacturers.
“Although many factories are still operating at or near capacity, higher commodity prices and rapidly rising transportation costs continue to restrict the profitability for many firms,” Long said in the report. “Even though business conditions remain modestly positive for some survey respondents, the talk of an impending recession is resulting in many expansion plans being put on hold.”
Automotive suppliers, though still hampered by chip shortages, are expected to weather any economic storm better than other sectors due to continued pent-up demand for new cars, Long said.
Key metrics in the July survey were a mixed bag:
The sales index, reflecting new orders came at -3 after being +26 in June
Production, or output, softened to +7 from +31 in June
Employment remained strong, reaching +27, up from +23 the previous month
Long cautioned against putting too much weight on the nation’s Gross Domestic Product (GDP) in determining the start of a recession.
While economists once used two consecutive quarters of negative GDP reports as a signal of the start of a recession, thinking has evolved in recent decades to include other factors such as income, employment, unemployment, industrial production, capital investment and consumer spending, he said.
