Key indicators from an economic report by a Grand Valley researcher continue to point toward a slowing West Michigan economy; however, a recession is unlikely to happen at least through early 2024.
Brian Long, director of supply management at GVSU, said the rumors of a recession have been persistent for years now, but the responses to his monthly survey of local businesses and manufacturers indicate the odds of an imminent recession are waning.
“Depending on what news source you're listening to, we've been talking about a recession for close to two years now. Now it’s October and with the numbers coming in, we can easily conclude that there isn't going to be a recession in 2023,” Long said.
“In fact, unless there's a major economic catastrophe that we just can't see right now, it's doubtful we'll see a recession in early 2024. Now for the rest of 2024, that's still in question.”
Long attributes the slowing West Michigan economy to several factors highlighted in the September survey. Indexes measuring new orders, production and purchases have slid further from the August survey.
“According to the September survey, the West Michigan economy still shows no sign of an impending recession, but is continuing to slow,” Long said. “And that's not all bad because the Federal Reserve wants the economy to gradually slow in order to reduce inflation.
“With that said, the Fed still doesn't want the economy to slow too fast. It's like trying to balance a basketball on top of a pencil.”
Long said given the responses to his survey, and the Fed’s hiking of interest rates, it will take a major economic disruption for the West Michigan and U.S. economies to fall into a recession.
“Interest rates are now obviously at the highest rate we've seen in years resulting in the economy continuing to slow,” Long said. “The Federal Reserve's dream of a soft landing is still intact, but the soft landing assumes that the economy continues to taper at the current rate.
“But another war, a collapse in the UAW negotiations, several more bank collapses or any other kind of major disruption could easily disrupt this glide path toward the soft landing.”
Here’s a look at the key index results from September’s survey of West Michigan businesses:
- New orders index (business improvement): -9 vs. -4 in August
- Production index (output): -5 vs. 14 in August
- Purchases: -22 vs. -17 in August
- Employment index: 0 vs. 2 in August
- Lead times index: -13 vs. -14 in August
More information about the survey and an archive of past surveys are available on the Seidman College of Business website.