Inasmuch as the soft economic readings of December failed to translate to the anticipated level of bounce-back that he anticipated, Grand Valley State University Professor Brian Long is pegging the West Michigan economy in January as "Flat, but meekly positive." That's his take following compilation of the latest numbers from his monthly business survey in the industrial sector of the region over the last two weeks of January.
Long is Director of Supply Management Research at the Grand Rapids institution, and he shares the data in his latest report out today, after hearing from multiple sectors across West Michigan in the first month of the New Year.
Long's Index of Business Improvement, also called the New Order Index, edged back to +4 from the -1 reading gathered in December's report. He cited December's report as "slightly negative," noting that Christmas vacations and scheduled plant closures typically result in softer numbers. However, he frets that January's report did not come in as strong as he would have liked, hence the designation of "meekly positive."
The Production Index in Long's report recovered more ground, rising to +12 from the -4 reading in December. Activity in the Purchasing Index remained on the negative side at -1, but improved from December's -4 read. Long had already noted in December's report that the month is often a month of slower sales and reduced production and had predicted that January would probably see a return of the same slow growth witnessed for dozens of months now.
Long says he had hoped for a stronger bounce back, and says that some firms are not as optimistic about the year ahead, however, the West Michigan economy continues to outpace the national economy as well as the overall pace for the rest of Michigan, so many firms across the region are still very optimistic.
Long says, "Given the slower pace of the West Michigan economy, it is not surprising to see that the momentum for most of our industrial groups has turned widely mixed." He adds, "This is clearly the case with our industrial distributors, the office furniture manufacturers, capital equipment firms, and aerospace contractors." The exception continues to come from the ranks of automotive parts producers in the region, who are still "basking in the light of record auto sales that are optimistically projected to go even higher in 2016."
Having said that, Long notes that the January auto sales report came in flat, and the retail auto market remains oversaturated and bolstered by lower credit requirements, massive incentives, and low gasoline prices. Long calls all of those, "incentives (that) cannot go on indefinitely."
Long says on the jobs scene, the Employment Index "came in only modestly positive at +8," however the projection indicates that many local unemployment rates should continue to fall for the next couple of months. Long warns, "It is essential to remember a lesson from Economics 101. As an economic indicator, unemployment is a laggard. Hence, the early stages of any economic downturn usually show no sign of trouble in the labor market."
Long reports that ongoing concerns about re-entering a recession are still the big question everyone is asking and suggest, "According to many indicators, that possibility remains a serious threat."
As always, here are verbatim anecdotal comments from participants in the January survey as included in the report. You can see the full report by clicking the link below:
- "Gasoline costs are down, but this is affecting our machine sales in the gas industries."
- "Prices are not falling commensurate with commodity declines. Firms are holding excess profits for their stock holders. Durable goods orders ex-autos are definitely slowing. A manufacturing recession has started. The Fed has hurt global markets by raising rates and 'Fed-speak' has wiped out trillions globally. Yay Fed! You just hurt the 1% and every American with a 401k and tax revenue."
- "We are heading toward our typical Q1 slow period, especially in the office furniture industry."
- "What the heck happened???? There is an eerie stillness of late. Activity has dropped. December finished with a whimper. January so far has been very slow."
- "Should be a solid year if the 2016 forecast in the automotive world materialize."
- "We are surprisingly steady this month, and next month looks about the same. Hopefully the trend continues."
- "Business is very strong, and quoting is also very high for this time of year."
- "In my opinion a slow fourth quarter was not an anomaly. I believe we shall see a 10-15% dip in year-over-year sales."
- "Business was extremely busy at the end of the year, but it seems to be slowing down now. We still anticipate 2016 to be a good year."
- "2016 is looking to be another great year!! We have the 1st, 2nd & 3rd quarters of 2016 almost filled!"
- "We're still slower than forecasted, but we hope to see a pickup in the larger projects in next 6 months."
- "January is busy, however, February & March are usually soft for us."
Here's the link to Brian Long's full report for January 2016: