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West MI Industrial Economy Headed to 2018 With a Full Head of Steam

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With strong November numbers now in the books and considerable enthusiasm for more to come, Grand Valley State University Professor Brian Long says that “normal growth” has returned, and “We’re heading into 2018 with a full head of steam.”

The affable Director of Supply Chain Management Research for Grand Valley State University’s Institute for Supply Management says he doesn’t see anything on the horizon that will “trip us up,” and that’s solid news for the West Michigan industrial economy.

Long’s November report says that, “Despite the Thanksgiving break and deer season” November is typically a productive month, and this year was no exception. According to the data collected over the last two weeks of the month, Long’s closely watched New Orders Index of business improvement, rose to +20 from October’s +11.

In contrast, the Production index backtracked slightly to +17 from +20, and, in a similar move, activity in the purchasing offices, his Purchasing Index, eased to +18 from +22. Long says, “Perhaps because of tax considerations,” the index of Finished Goods Inventory displayed more liquidation and fell further to -9 from -2. In contrast, the Raw Materials Inventories index jumped to +12 from -8. Because of a growing list of shortages, the index of Lead Times for November remained stuck at +28, well ahead of the 25-year average of +4.

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As he turns his attention to individual industries in the West Michigan industrial economy, Long tells us that the November performance for most groups was “mixed.” He adds, “Despite the modest softening in auto sales, the local auto parts producers remain surprisingly strong, even though they continue to voice concern about possible slower auto sales as we head into 2018.”

Additionally, this is currently the slow season for office furniture sales, and the industry still appears to be topping out at the present level. Nevertheless, some of the smaller office furniture firms are still expanding.

For most industrial distributors, November was one of their better months. Meanwhile, Long says “A plateau also seems to be forming for the capital equipment industry, but recent changes in the tax law could result in improved conditions in 2018.”

Throughout West Michigan, business optimism remained positive but “little changed,” according to Professor Long. He says, “Our November index for the Short-Term Business Outlook, which asks local firms about the perception for the next three to six months, eased modestly to +28 from +30.” However, he adds, “The Long-Term Business Outlook edged slightly higher to +49, up from +45. Just as last month, the anecdotal comments from the survey participants continue to be cautiously optimistic.”

Long notes, “In summary, the local economy remains positive, and currently shows no signs of retreating as we head into the last month of 2017. Although many of our local industries are showing signs of topping out, the current plateau is still very profitable and stable. As a result of the recently enacted tax reform package, further economic expansion may be in the offing for 2018. The shortage of skilled workers in some professions may result in wages beginning to rise more rapidly.”

Long concludes, “I feel very good going into the new year, saying that it’s quite possible that 2018 will be one of our best years in the previous ten years.”

Here is a sampling of the anecdotal comments shared verbatim in Long’s report:

  • “We’re very busy going into the end of the year. January volumes are also very strong.”
  • “Getting aggressive on RFQ responses to our customers.”
  • “Sales have been pretty slow/flat this year, but we finally had some sales growth for the month of October.”
  • “We are filling up our own capacity and relying more on our supply base to keep us on time with our customer orders.”
  • “Business is strong and steady.”
  • “It’s still a challenge to find qualified candidates for job openings!”
  • “Business is seasonal. We’re getting ready for year-end.”
  • “Controlled growth is the key right now. We need to grow sales but control expense.”
  • “We’ve had the strongest November in company history!”
  • “Incoming orders are up. We’re hoping it lasts this time.”
  • “Business seems to be very Robust.”
  • “The typical year-end push underway. The year is shaping up to be another banner year.”
  • “We’re hopeful for 2018 to be the same or better than 2017.”
  • “Our future business looks promising. We will see some nice growth over the next several years.”
  • “We are still having a hard time finding enough workers.”
  • “We are being hit with about 3% price increases on items.”

Click the link below for the complete report from Professor Brian Long at Grand Valley State University:

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