3831911

Seasonally Flat for West MI Economy

3831911

Anybody who’s ever been in a hurry to get business done during the month of December knows only too well how difficult it can be to get key decision’s made…or even to gather together all of the key decision-makers. So, when measuring the scope and scale of the West Michigan Industrial Economy, Professor Brian Long rarely panics if the numbers in his monthly survey of business trends and forecasts tend to soften or even fall off.

Dr. Long, the Director of Supply Chain Management Research at Grand Valley State University in Grand Rapids loses very little sleep over his December survey results, and last month was no exception as he labels the West Michigan Industrial Economy, “Seasonally Flat.”

He even steps out to say, “If there is a recession lurking out there waiting to hatch, we can’t see it now.”

The December report for the Institute for Supply Management confirms that it was predictably a slow month for many industrial firms. The survey, conducted during the last two weeks of December, produced a closely-watched New Orders Index that checked in at -5, considerably below the index of +23 posted as recently as September, but comparable to last year’s “equally reticent reading” of -1.

ADVERTISEMENT
Your content continues below

Most of Long’s other key index readings were “modestly positive.” The Production Index eased to +3 from the previous month’s +4, while activity in the purchasing offices remained positive but edged lower on the Purchasing Index to +3, down from November’s +6.

Long says that unlike the inventory spikes recorded in August, the December Finished Goods Inventory Index continued to edge modestly lower to -7, down from the -2 reading in November. The Raw Materials Inventory Index actually turned positive at +4, up from November’s -12 score. Long says, “Hence, we conclude that the West Michigan economy for December was fairly flat.” He quickly adds, however, “We can expect the January numbers to reflect the back-to-work mood of the New Year,” but, “Many of our industrial groups are showing signs of topping out, so growth for the first quarter will probably be modestly positive.”

When scanning individual industrial sectors, Long says “It is not surprising to see that many of our firms downshift to a slower pace in December. The auto parts suppliers continue to raise concern over the recent softening in auto sales. For two or our survey respondents, new quotation requests are down considerably.”

In the Office Furniture Industry sector, “Most signs point toward sales topping out, although business conditions still remain positive.” Long says that the bias for the Capital Equipment Industry “is now on the down side.” He adds, “Typical of most Decembers, performance for the Industrial Distributing Sector was modestly lower.”

Long routinely scans for the business outlook prospects as well, taking into account business sentiment for both the short and long terms. He says the Short Term Business Outlook (which asks local firms about the perception of the next three to six months) rose to +20 from +12, and in a similar move the Long Term Business Outlook edged higher to +45 from +34.

The long-time business analyst routinely shares anonymous verbatim anecdotal comments and overall Long says that from those comments, “At least some respondents feel that the post-election mood has resulted in a more optimistic outlook for 2017.” He adds, “Changes proposed by the new administration will come much slower than implied by the pre-election rhetoric, hence, the business environment will be reasonably stable.” He concludes, however, that “The post-election mood has clearly changed from uncertainly to optimism.”

In sharing his report with his private interest group, Long writes in a cover letter, but not in the report itself, “In recent months, we have often reported that West Michigan was doing better than the rest of the state, and even the rest of the country. For this month, the opposite seems to be true.” He adds, “Part of the problem gets back to two of our cyclical industries, namely automotive and office furniture. Both of these industries appear to have topped out, at least for the time being. For many months we have talked about saturation for the auto market, and that even has now arrived.” He suggests, “At best, the auto industry can hope to maintain the current level of sales for 2017. More than likely, the U.S. dealers will sell somewhat fewer cars in 2017 than in 2016. The margin will of course depend on the rest of the economy, which now appears to be gaining strength going into the first quarter.”

Here is a random sampling of Professor Long’s shared verbatim, anecdotal comments gathered from his December 2016 survey:

  • “Supply shortages have impacted production, and will require overtime to catch up.”
  • “We have a typical year-end slowdown to reduce inventory levels prior to tax assessment.”
  • “Orders are above forecast for the first time in the last 6 months. We are cautiously optimistic as long as energy prices don’t fall again.”
  • “We are starting to see some downward price movement on polypropylene.”
  • “Steel prices are seeing a huge increase. They look to be going up for the first half of 2017.”
  • “We had a good 2016. 2017 should be better.”
  • “We had a fairly busy holiday season compared to years past.”
  • “Increases in sales continue.”
  • “It’s still very stable here.”
  • “Steady and boring, which is good.”
  • “After a very busy year, we have slowed down considerably as we got into late November and early December.”
  • “December has not slowed down at all.”
  • “2017 could be very challenging considering the recent trends in commodity pricing.”
  • “Now that the election is over, (also after the smoke settles), the end of the year comes and goes. Hopefully, we can get back to business.”
  • “With the current level of quoting, next year is going to have good potential.”
  • “The 4th quarter of 2016 now officially stinks. October was slow, November was slower. Halfway through December, I see no change for the better. This appeared to be a pretty good year through the third quarter, but not as good as last year. I’m not sure, but this year will probably end up with sales equal to four or five years ago. But Trump is going to fix everything, right?”

To see Dr. Long’s complete report, simply click the link below:

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

*