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New Factory Orders Hit 16-Mo High

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It looks like once everybody climbed off the beach and got back to work in September the West Michigan Economy performed a nice solid turnaround — literally getting back to business. That’s the quick assessment from Dr. Brian Long, Director of Supply Chain Management Research at Grand Valley State University in his latest snapshot of Current Business Trends.

Long’s regular monthly survey hit an 16-month high in the September report released late last week, and he says “As we move into the fourth quarter of 2016, the West Michigan industrial economy continues to expand.” His latest survey was completed over the final two weeks of September and he calls it the best report in 16-months, noting, “The weak numbers we saw earlier in the year are gone.” However, he cautions, “The national purchasing manager’s surveys are not as strong, and the rest of the world is stuck in a slow growth mode.”

Long’s most important metric, his New Orders Index — a key measure of business improvement — hit that sixteen month high, of +23, up significantly from August’s reading of +6. In a similar move, the Production Index soared to +24 from August’s anemic +6 reading.

Activity in the Purchasing Index returned to a positive reading of +15 from the -3 a month earlier when the summer doldrums had set in. Additionally, following an unusual amount of inventory accumulation in August, the September indexes representing both Finished Goods Inventories and Raw Materials Inventories “came back to normal.”

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Professor Long’s Institute for Supply Management says that for most industrial groups, September “was a good month.” He adds, “Typical of the back-to-work nature of the post-Labor Day mindset, most industrial distributors in West Michigan reported an uptick for the month as fall maintenance work got underway. Most of the auto parts suppliers were positive, although a couple signaled a note of caution due to softening auto sales.

The office furniture industry continues to show evidence of topping out, but overall business conditions still remain positive. Long says, “Just like last month, the capital equipment industry remains checkerboard because of the large variations from industry to industry.”

Long suggests that it is fortunate that the business sentiment numbers for September remained very positive as well, with the Short Term Business Outlook, which asks about the perception of the next 3 to 6 months, bounced to +28, up nicely from +15. The September index for Long Term Business Outlook retreated a couple of notches to +41 from +46, but remains strong.

The September Employment Index for West Michigan rose to +9 from +6, but remained below the growth rate of the previous ten months.

“Looking forward,” says Long, “It is obvious that the news cycle will be dominated by the upcoming election until November 8. Unfortunately, some pundits have noted that the stock markets are not pleased with either candidate, and the possibility of a post-election down-tick is real.” He adds, “The business community dislikes uncertainty, so business expansion may be put on hold until the future becomes clear, and that could take several months.”

Long concludes, “Although the wind can easily blow in a different direction, our local statistics indicate that the West Michigan economy now has plenty of steam to carry us to the end of the year. As always, we need to keep a watchful eye on sales statistics for both the auto and the office furniture industries.”

Long’s monthly snapshot always includes random, unidentified, anecdotal comments from respondents and here is a sampling of those comments:

  • “We are still having a hard time finding people that want to work at least 40 hours per week. Absenteeism is a big problem.”
  • “We are waiting for the orders to increase.”
  • “Automotive outlook is starting to soften.”
  • “It was a good summer, sales wise…”
  • “August was a more robust month than expected, but September is off to a slower start. Auto sales were off 4-percent in August, so that could signal a cooling-off period in that sector after five consecutive years of very solid volume. Automakers were quick to roll out 0% interest and rebates.”
  • “We are still doing quite well, thank you very much.”
  • “We’re still on track for a solid third quarter (which is historically down), and strong fourth quarter.”
  • “After the summer vacations, the amount of inquiries are picking up.”
  • “We still have a very positive outlook. Business is good.”
  • “This month is trending better than last month and better than the same time last year. We are hoping this continues.”

As always, you can read Long’s full report and see his charts and graphs by clicking the link below:

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