GRAND RAPIDS, Mich. — The greater Grand Rapids economy continues to improve amid growing optimism -- but it is still too early to say the recession is over, according to a survey compiled by Brian Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.
The Greater Grand Rapids survey was conducted the last two weeks of August. The index of new orders, which tracks business improvement, moved up to +24 from +19 last month. This index has now been positive for five consecutive months. The production index rose to +34 from +19. The index of purchases rose sharply from +4 to +33. And for the first time in more than two years, the index of employment turned positive, rising to +19 from -4.
“Much of the improvement in this month's statistics can be attributed to the decision by many of the automakers to boost production to rebuild inventories depleted by the cash for clunkers program,” Long said. “That’s why new orders are up for many of the auto parts suppliers in the survey.”
Long added that things were positive for industrial distributors and mixed for capital equipment firms. The major office furniture companies remain relatively stable, but one firm was clearly down. “The optimism for most firms is spreading, and they are increasingly convinced that this recovery is here to stay,” Long said.
But even though the news is mostly good, Long stressed that it is important to keep a sense of perspective. “The recession is not over just because we now have some positive results. We are simply at the bottom of a very deep hole, and are just now starting to crawl back out,” Long said. “The industrial market is almost always at the forefront of a recovery from any recession, but it takes a long time for positive growth in the industrial sector to work its way through the supply chain and generate more income for the consumer and a drop in unemployment. In fact, unemployment may actually rise for the next few months in certain regions of the country or in the state.”
Long also noted that the fiscal situation for the State of Michigan is dire, with revenues down considerably and significant cuts in spending still required.
“The recovery is underway, but don't expect overnight miracles,” Long said. “The bloated housing market, tight credit, and slow recovery for the auto industry are still major problems that will generally have to heal on their own. Many of the automotive jobs that have been lost will never come back to Michigan. The state's decision to transition development efforts to other sectors may bear fruit, but it will take many years to happen.”
The Institute for Supply Management, Greater Grand Rapids 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 conduced 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.
Brian Long says the cash for clunkers program was good for Michigan (audio clip)
He says while cash for clunkers helped, it's possible that it won't have long-term effects (audio clip)
He says it's encouraging that credit is loosening up (audio clip)
Long says the recovery will be slow (audio clip)