Current Business Trends: Modest growth returns

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The greater Grand Rapids industrial economy is experiencing modest growth, according to the 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 in the last two weeks of December. The survey’s index of business improvement, called new orders, rose to +31, up from +15. The production index edged higher to +19 from +18. The index of purchases rose modestly to +19, up from +16. The employment index rose to +27, up from +21.

Long said historically, December has been a seasonally slow month because of reduced production schedules and the Christmas holidays, but December’s report for greater Grand Rapids broke the pattern. “Comments from participants who were surveyed are among the most positive we have seen since our local recovery began in April of 2009,” Long said.

Long added that the office furniture industry is pulling out of the long recession, evidenced by an uptick in new orders in recent months, and industrial distributors had one of their best months in recent memory. He said automotive parts suppliers posted a better month than usual with some electing to forego the usual holiday shutdown. 

Long said several factors will define the 2011 economy: automotive sales, inflation, interest rates, real estate and unemployment rates. “If the economy continues to improve at its present rate, we will probably begin to see more consumer inflation in the second half of the year. Food prices should continue to rise, as will the cost of many types of consumer services. Gasoline will probably approach $3.50 per gallon by mid-summer,” he said.      

Although home prices are still falling at the national level, Long said there is evidence prices at the local level may have bottomed out and may even see some modest improvement throughout 2011. He said more bankruptcies and foreclosures will continue to add more houses to the market. The unemployment picture for Michigan will remain negative but will probably drop faster than the national rate if the automotive industry continues to improve. 

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 purchasing managers 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.

DOWNLOADABLE AUDIO:

* Brian Long said auto assembly plants didn't shut down in December, as they had plenty of orders (audio).

* Long said  unemployment in Michigan remains "sticky" (audio).

* Long said real estate is getting better but it may take up to 15 years for homes to return to their 2005 value (audio).

* Long said he doesn't predict a second leg to the recession (audio).