Current business trends show modest growth

The greater Grand Rapids industrial economy experienced modest growth in December, 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 during the last two weeks of December. 

The survey’s index of business improvement, called new orders, eased to +5, from +16. The production index also retreated, but at +10, is still in line with December figures from the past. The employment index, which had dropped to +0 as recently as October, remained positive at +9.

Long said factors that will define the 2014 economy include: automotive, industrial inflation, interest rates, real estate, unemployment and Obamacare.

“Michigan’s recovery from the Great Recession has still been heavily fueled by automotive, and for West Michigan by the firms producing automobile parts,” said Long. “The past year turned out to be stronger than industry projections, although much of the gain was again attributed to ‘pent up demand.’ The December sales for the industry were slower than expected, so we may have already seen the peak in sales. Even if auto sales flatten at the present level, most of the firms are now comfortably profitable.”  

Long said it is likely the unemployment rates for the U.S., Michigan, and West Michigan will continue to slowly decline in 2014. Lack of hiring and expansion by smaller firms will keep the unemployment levels much higher that they should be. He said shortages will continue for trained technicians in many fields and youth unemployment as well as the unemployment for unskilled workers will remain excessively high.

Long described Obamacare as one of the worst messes in recent history. He said: “Most of the economic fallout will be limited to declining confidence by consumers and small businesses. Large firms have already figured out how they will respond as the mandates unfold, but small businesses are far less certain. Obamacare will not drive us into a recession. Except for hospitals, drug companies, and other medical firms, the health care law does not impact the supply chains of most companies.”   

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 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.”

For more information, contact Brian Long at (269) 323-2359.