After an upbeat and robust September report, Grand Valley State University Professor Brian Long says that the West Michigan Industrial Economy has returned to an “almost flat” growth pattern, but offers “no evidence that we are about to slide into a recession.” In fact, Dr. Long suggests, “Even then, there is still enough momentum to safely carry us through the end of the year.”
Long, who is the Director of Supply Chain Management Research at Grand Valley, is out with his routine monthly snapshot of the health of the West Michigan Industrial Economy, and says that after September’s sixteen-month high, thanks have flattened out considerably.
According to Long’s all important New Orders Index, the local measure of business improvement has “retreated to an anemic reading of +1, considerably below our September index of +23.” Long says that in a similar move, the Production Index eased to +4 from a robust +24 a month earlier. The survey period involved this time is over the final two weeks of October.
Activity in the purchasing offices, as measured in Dr. Long’s Purchasing Index actually returned to a negative reading of -3, down from +15 just a month earlier. However, unlike the inventory spikes reported in August, the October indexes representing both Finished Goods Inventories and Raw Materials Inventories “remained almost unchanged.”
Long tells us, “It should be noted that the West Michigan economy is still very slightly positive, but the sharp uptick we were blessed with in September has not continued.”
When Long turns his attention to individual industrial groups, he says “it is not surprising to see that most groups flattened.” He notes that several auto parts suppliers raised concern over the recent softening in auto sales and noted that new quotation requests were down considerably. He also report, “Just like last month, the office furniture industry continues to show evidence of topping out, although business conditions still remain positive — at least for now.” He also reports that the bias on the capital equipment industry is “now on the downside.” For October, performance for industrial distributors was mixed.
Long also routinely queries each sector for business sentiment trending. He calls the numbers in that regard for October “little changed” and still “positive.” The Short Term Business Outlook, which asks about their perception of the next three to six months, eased modestly to +22, down from +28. Conversely, the October index for Long Term Business Outlook edged higher to +45 from +41.
Long says that from the anecdotal comments, “It is obvious that some respondents to this month’s survey are concerned about the outcome of the election. Business planners do not like uncertainty, so at least some expansion plans have been put on hold until the actual outcome of the elections can be determined and the direction that the new administration will take.”
As Long wraps up the commentary of his report, he asks, “Where is the recession that was being so widely predicted earlier this year?” He then answers, “It is obvious from this report that we currently have no evidence to suggest we are about to drop off a cliff.” He points out that locally, “Our biggest risks relate to downturns in the auto and office furniture industries.” He concludes that “The odds of sliding into another recession over the next twelve months are currently about 50-percent.”
Among Long’s collection of anonymous anecdotal comments readers can find this sampling:
- “We will be busy up until the holidays. However, overall sales are down from the same time last year.”
- “Sales below forecast so far this month. We are holding tight on hiring and capital expenditures until we see a sustained increase in orders.”
- “What the heck happened? We were on an upswing for three months in a row and September was, way, way down. Now it appears October is worse. Who hit the brakes????????”
- “I am concerned over the softening in the auto sector.”
- “It feels like this year will end good, but next year will be softer, at least in the first quarter. I sure hope Trump can pull off the win. We need a good businessman in office.”
- “We’re still pretty conservative on order intake. Come on election!”
- “We’ve had a strong start to the fourth quarter.”
- “It’s an excellent fourth quarter and year in general.”
- “Orders are very strong. We continue to struggle keeping up with demand and filling open technical and general labor positions.”
- “We have slowed down considerably the last two months. November is filling in, but at below expected levels.”
- “Business is steady and good.”
You can read Long’s complete October report by clicking the link below (although the report bears a November 7th release date, Long purposely withheld its release until today to avoid the election “pandemonium”):
