While national and international economies are showing encouraging signs of resiliency and growth, the West Michigan economy has hit a soft spot, according to a Grand Valley State University researcher.
Brian Long, director of supply management research at GVSU’s Seidman College of Business, said his monthly survey of manufacturers and businesses indicates a local economy that is slowing, although not in a recession.
Two key statistics fell in January’s survey. The new orders index, which tracks business improvement, dropped significantly last month and the production index, a measure of business output, slid to a 30-month low. Long attributed the decline to softening conditions among automotive parts suppliers and office furniture firms.
“The problem is that after months of strength, business conditions for our automotive parts suppliers have softened,” Long said. “Some got tied up supporting these new fully electric vehicles that aren’t selling like the manufacturers promised, but others have simply run into some new competition, which is typical of many businesses.
“Now, the office furniture firms have also softened. This is because there’s a glut of excess office space in some major markets, and higher interest rates have resulted in some new office projects being scrapped or, even worse, thrown into bankruptcy.”
Yet, despite the data, Long said confidence remains high among consumers and industries at the local and national levels. Studies from the University of Michigan and The Conference Board showed upticks in consumer sentiment, Long said.
“One of the bright spots in this month’s survey is that confidence seems to be building at both the consumer and industrial level,” Long said. “I suppose some of the new confidence comes from the widespread belief that there is no longer the possibility of us immediately sliding into a recession.”
As for the possibilities of a recession in 2024, those appear to be fading, Long said.
“For about the past two years, we’ve been living with the prediction of an impending recession from some otherwise fairly reputable economic organizations,” Long said. “But as we enter 2024, most of the new forecasts are trending in the direction of a slower economy for 2024, but no official recession. However, of course, increasing turmoil in the geopolitical situation leaves the door open for an unexpected event that could upset any forecast.”
More information about the survey and an archive of past surveys are available on the Seidman College of Business website.