The index was produced using survey data collected in the last two weeks of July by Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.
The index of new orders, which tracks business improvement, remained positive at +19, down from last month's +26. “Given that this is the fourth consecutive month that the new orders index has been positive, it is now safe to say that the Grand Rapids economy probably hit bottom in March, and that the long-awaited recovery has begun,” said Long.
The survey also shows that the production index edged up to +19 from +14. For the first time since July of 2007, the index of purchases turned positive at +4, up from -3 last month. Although the index of employment remained slightly negative at -4, Long said it is encouraging to see that 17 percent of the firms in the survey are now adding personnel.
“What does not show in this statistic is that some firms that had cut back to a 32-hour work week are now resuming their normal schedule,” Long said. “However, some firms are still cutting back, and for them, the new wave of optimism has yet to arrive.”
Long said that some auto parts suppliers are stabilizing, but many of them are still weak. July It was a better-than-usual month for the industrial distributors, and for the third consecutive month, local capital equipment firms are reporting better business conditions. The major office furniture companies appear to have stabilized and are now reporting some modest improvements in sales. The smaller office and steel furniture firms are also doing a little better. “All in all, the comments we’re hearing point toward cautious optimism, although some firms are still buried in the doldrums,” Long said.
While the news is good overall, Long cautioned that it may be some time before everyone feels the effects of an improved economy.
“The long-awaited recovery has arrived, but a slow recovery should still be expected,” Long said. “The Cash for Clunkers program may have been the catalyst that the auto industry needed to stage a turnaround, but time will tell. The worldwide economy is improving, which will help our domestic economy, especially for firms that do a lot of export business. All of this could still be tripped up by the massive treasury funding and refunding that we expect the world to purchase over the next few months. Finally, we should not expect the jobs to come roaring back any time soon. Employment is always a laggard in any recovery, and this one will be no exception.”
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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 purchasing managers 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.
Call Brian J. Bowe at (616) 331-2221 or e-mail [email protected] to arrange interviews with Long.
