Current Business Trends: GR economy negative

GRAND RAPIDS, Mich — The latest word on the West Michigan economy remains modestly negative, according to the Greater Grand Rapids Association of Purchasing Management survey, compiled by Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University. This monthly survey, which Long has been compiling for 28 years, has now moved to a new home in Seidman College of Business.

According to the data, collected in the third and fourth weeks of November, the index of new orders rose to +4, up from -17, while the production index remained negative at -13, only slightly better than the -16 reported last month. The employment index remained negative at -16, virtually unchanged from last month's -17. The index of purchases dropped significantly to -29, down from -16. 

“While it was certainly good to see the new orders index turn modestly positive, our other numbers are not improving,” said Long. “Hence, we must score the overall report for this month as modestly negative.”

Long added that the other big news for Michigan has been the repeal of the sales tax levied against services. “Aside from adding billions of dollars of new taxes for consumers and business, the state tax officials in Lansing were relieved of the responsibility of adding huge numbers of staff people to administer the new tax.  The bad news, of course, is that the difference was made up by simply adding a surcharge to the Michigan Business Tax, formerly known as the Single Business Tax,” he said. 

There remain questions about the outlook for the new year, Long said. “We are still uncertain about how deep the sub-prime mess will cut into the economy as we look forward to 2008. Whereas tightening of loaning requirements have clearly been felt in the slumping housing market, the auto finance firms as well as every other form of consumer credit have seen tightening as well,” he said. “So far, declines in automotive and housing have been offset by strong demands for export goods, including those associated with the aircraft, machinery, and agricultural industries.  On a nationwide basis, job losses in Michigan have been offset by job gains in other parts of the country. With the U.S. Treasury officials and various committees in Congress working on band-aid solutions to the problem, we can hope that there will be enough fiscal and psychological relief to keep us out of a recession.  At this time, there is still at least a 60 percent chance that a recession can be avoided. However, we will certainly enter 2008 at a slower pace.”

The monthly survey of business conditions includes 45 purchasing managers in the Greater Grand Rapids 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 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. Call Brian J. Bowe at (616) 331-2221 or e-mail [email protected] to arrange interviews with Long.