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Is West Mi Industrial Economy Flatlining?

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Is the West Michigan Industrial Economy flat-lining after several months of positive reporting? That’s a key question for Dr. Brian Long, Director of Supply Management Research at Grand Valley State University following his latest monthly survey results from the industrial sector throughout West Michigan. His latest monthly report sums it up in the title: Back to Flat.

Long says, “Flat, is the latest word on the West Michigan economy,” following his data gathering and a series of anecdotal comments that traditionally accompany his research. The latest survey period encompasses data accumulated over the last two weeks of May.

Long’s New Orders Index, the closely watched index of business improvement, backtracked to +0, down from +7 in April. The Production Index “remained positive,” according to Long, “but retreated to +4 from +20.” Activity in the Purchasing Index “gave back most of its previous gain to come in at +7.”

Long says, “For May, it can be noted that the West Michigan economy came in flat.” He adds, “The report for West Michigan is slightly weaker than the performance of the national economy as well as the overall Michigan economy,” running substantially contrary to most monthly reports over the last year or two. Fortunately, he notes, “One month never constitutes a trend, and we can hope for a rebound in June.”

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Looking more deeply into specific local industrial sectors, Long says, “Even though the local auto parts suppliers are operating at full capacity, New Orders seem to be slow coming in.” The office furniture market “remains stable, and some of the smaller firms are setting records.”

The May sales picture for industrial distributors “came in mixed, with some firms very strong and others in an unexpected lull.” Capital equipment firms “continue to report widely mixed results,” according to Long, “mostly based on the wide variety of products in this category.”

Long surmises that “given the less positive New Orders and Production statistics, it is no surprise that the business sentiment numbers from our local survey came in a little less upbeat.” That index asks about the perception of the next three to six months, or the Short Term Business Outlook, and the Long Term Business Outlook scanning the next three to five years.

The Short Term Outlook edged down to +24 from +34. Long notes, “Although +24 is not a strong number, it is still much better than the +4 reported last October when the mood was much more pessimistic.” In the Long Term Outlook, things eased modestly to +42 from +49.

Long says that “after many months of price relief, out local index of prices depicts a return to industrial inflation.” He reports, “For May, our index rose to +18, up significantly from May’s +6.” He adds, “Almost every grade and type of steel is now substantially higher than just a few months ago, and the pundits are predicting more price increases over the next few months.”

Long asks, “As we enter the summer months, where do we stand?” He answers, “Many of the major economic forecasters continue to warn of a possible recession on the horizon, although the mood has recently turned less pessimistic because some of the stats for the spring have come in stronger than expected. Although bullish and bearish forecasters continue to make projections, it is still possible that the U.S. economy could slide into a patter of very slow growth in the range of 1-percent and avoid an official recession.”

As always, Long’s report includes a series of anecdotal comments, and here is a sampling of some of those, shared verbatim from the survey itself:

  • “We’ve seen some slight softening in orders from our customers. Many new projects in the launch phase are now pending.”
  • “Hiring good manufacturing people is still a big problem.”
  • “Business is slower that it has been for the last six years or so, but we are still holding our own.”
  • “Business conditions are steady.”
  • “Business has been down since December. Low oil prices are having an impact on our business, and I believe companies are holding up on capital purchases to see who the next president is.”
  • “We’re not sure what’s going on. May was the slowest month for order entry in the last two years. Customers all say they have slowed down.”
  • “The year is starting out fairly well.”
  • “Business is as usual for this time of year.”
  • FY2016 revenues are up about 7-percent over last year, but with the continued price increases, there may be little if any effect on the year end.”
  • “If the Fed raises interest rates in June, all bets off. China is pushing back on steel duties.”
  • “Business continues to be robust, and quoting activity is good.”
  • “Business has slowed down all of a sudden. There is too much uncertainty in the market right now!”

You can see Long’s full report including all the charts and graphs by clicking the link below:

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