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Optimism & Growth Return to West MI

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Even before the improved spring-like weather landed on our doorstep in recent days, another harbinger of optimism came knocking on the door of the West Michigan manufacturing trades in the form of renewed growth in the February Survey of Current Business Trends from Grand Valley State University Professor Brian Long.

Long is the Director of Supply Chain Management Research for the Grand Rapids-based university, and his monthly survey of data gathered under the auspices of the Institute for Supply Management of Greater Grand Rapids in the final two weeks of February brings cautious optimism once again. Long tells subscribers to his report, "We had a little uptick for the month, largely because all of our key industries are still on track."

Long, who was the keynote speaker for the first ever Business Recognition Breakfast at Cornerstone Chamber of Commerce and Cornerstone Alliance last month, says "2016 has finally arrived for the West Michigan industrial economy." Long notes that December is often a month of slower sales and reduced production, "But, it took until February for West Michigan to return to the same slow growth we have reported for most of the past seven years." He adds that, "Although our statistics for January were incrementally positive, the data and comments collected in the last two weeks of February reflect the back-to-work tone of a post-holiday season."  

Long's New Orders Index of business improvement rose to +14, a nice increase from the +4 read in January. The Production Index, however, was unchanged, holding steady at +12. Despite those gains, the Purchasing Index "remained below par at -3, only slightly lower than the -1 reported last month." 

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Long says that just as it has for the past six months, the West Michigan economy continues to outpace the national economy as well as the overall Michigan economy. He tells us, "Although some firms are continuing to feel the impact of global economic stagnation, many of our survey participants remain fairly optimistic about 2016 — at least for the first two quarters."

Long notes that in early February, the Dunlap Overall Index for January, a quarterly survey of the office furniture industry, clocked in at 57.25, "only a little below the record number" of 59.72 record in July of 2005. Also drawing interest, the Gross Shipments Index shot up to a record high, and the Index of Raw Materials Costs came in at a record low. Long says the unfortunate note for the region is that respondents to the local survey are not as optimistic. By way of example he notes that one respondent says New Orders for the office furniture business are often slow in the Christmas season, but rebound in January, but that has not happened at his shop. 

Looking at other industries, the automotive parts producers in the region turned in a mixed performance in February. Long reports that retail auto sales are still strong, and several local fabricators are still at full capacity, "However, a couple of others are waiting for new business to materialize."

The capital equipment industry is also mixed, depending on the industrial segment being served. Long reports, "One respondent reported seeing a slowdown in machine tool purchases and hearing that large machine tool companies are starting layoffs," while in contrast, "Another local firm reported a record year for 2015." 

Aerospace industry sources are still optimistic that the aircraft building boom will continue. 

Long suggests that the turmoil in the global financial markets and the harsh political rhetoric of the campaigns may have played a role in a fading picture of business optimism. He tells us the "Short Term Business Outlook Index retreated to +19 from +24, and the Long Term Business Outlook saw a pullback to +40 from January's +48." He concludes, although both indices are positive, neither is as strong as it was a few months ago.

Long reviews in his report some of the street talk of recession that he addressed at the Cornerstone Annual Meetings, however he wraps his report by saying, "The present West Michigan Economy still has enough positive momentum to carry forward for a few more months."

You can see his full report by clicking the link below. In the meantime, here are sampled comments from the verbatim offerings of survey participants:
 

  • "We see some signs of weakness, but a solid foundation continues to keep us optimistic."
  • "Status quo. We are busy, but remaining consistent."
  • "The truck and trailer market may be softening."
  • "We're seeing the typical first part of the year slow down, but automotive is still relatively strong. There's a lot of new quoting activity."
  • "The second half of 2015 was down, and the first quarter of 2016 will be down as well."
  • "Business is slow again, with no signs of improvement."
  • "At least here in Michigan, there is an increasing trend for companies headquartered to buy equipment and shipping to satellite in southern states, across the border, AND across the ocean."
  • "Business continues to be strong."
  • "The mild winter has been good for our budget, so we are projecting a very busy spring."
  • "Business is good, which is very usual for an election year."
  • "We started off the year with some great sales! Let's hope it continues for the rest of the year."
  • "Still steady, but we are slow on quoting."
  • "We are having a hard time finding people that want to work. We have to let people go because they have bad attendance."
  • "Lower costs are starting to be passed down from declining commodity prices."

Here's the link for Long's complete February 2016 report:

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