Even as worries over slumping auto sales continue to persist, so too the West Michigan industrial economy remains on track and is “still growing” according to the man who studies the data every day in his role as Director of Supply Chain Management Research at Grand Valley State University in Grand Rapids. Professor Brian Long says his latest research data shows that, “So far, the reduced auto sales have had little impact on our local auto parts suppliers.” He captures the numbers and sentiments of West Michigan manufacturing executives routinely, and adds, “With thousands of cars due to come off lease in the next few months, I see no way that we cannot expect more declines in auto sales.”
Long, who has just filed his latest monthly update points out that, “So far, the decline remains orderly, and the supply chain is adjusting.” However, he adds, “If the pace of decline accelerates, that picture could change.”
Dr. Long’s June research data, compiled over the last two weeks of June, show the industrial economy is still tracking. His New Orders Index of business improvement came in at +31, a modest improvement over May’s report of +27. He says that in a similar move, the Production Index edged up to +26 from +19.
Meanwhile, activity in the Purchasing Index, “remained virtually unchanged at +22,” with a note that because of the season, June’s Finished Goods Inventories Index “drifted back to neutral at +0, down from +8, while the moderating of price increases helped bring the Raw Materials Inventories Index down to +11 from +19.
When Professor Long turns his attention to individual industry sectors in West Michigan, he notes that slower auto sales have resulted in most auto parts suppliers showing signs of plateauing, however, “No major firm has reported a significant drop in sales.” In fact, he notes, “A couple of firms have seen an uptick in quoting activity.”
The office furniture industry continues to show signs of topping out, but no declines appears to be on the horizon. Long adds that “because of the apparent topping out for some of our local industries, the capital equipment market remains mixed, and the bias is still to the down side.” For the industrial distributors, “The summer maintenance schedules have given some firms a slight boost.” Long adds, “With a couple of exceptions, most of the comments from all of our survey participants remain positive.”
Dr. Long’s report says that given the continued rise in global and domestic uncertainties, “It was not surprising to see that part of our monthly outlook at business optimism modestly backtracked for June.” The West Michigan Short Term Business Outlook Index, which asks local firms about their perception for the next 3 to 6 months, remained virtually unchanged at +34. Looking out 3 to 5 years, however, the Long Term Business Outlook Index “eased to +37 from +46, however, both indices remain very positive, and the anecdotal comments confirm that we remain on the right tack as of June.”
In summary, Long says, “We remain hopeful that large consumer incentives will help clear the bloated inventories of unsold cars, and that the sales decline will remain fairly orderly. Otherwise, the economic outlook for the rest of the summer looks very positive.”
Here is a sampling of the anecdotal comments for survey participants shared anonymously by Dr. Long:
- “May business was up nicely from April. June looks to be down from May. The seesaw continues.”
- “Automotive conditions are still effecting how most of my customers are planning. Car sales are holding their own, but not improving. That said, it makes suppliers nervous and not willing to spend money on expansions until things improve.”
- “Business is still very good. We are struggling to find skilled labor as most people are.”
- “Short term outlook still appears to be a little weak, but beyond that looks strong.”
- “Business is not as robust as it had been for the past few years, but we are still doing fine.”
- “Business remains steady. The forecast looks the same for the next several months.”
- “Busy, busy!”
- “Business is not slowing as much as expected for the automotive shutdown period.”
- “It’s been a pretty calm and stable month.”
- “We’re getting very busy in our own shop, and keeping many suppliers busy as well.”
- “Things are showing good improvement. Lots of major projects are being quoted.”
You can read Professor Long’s full report by clicking the link below:
