Michigan’s economy should record “significant expansion” in 2021 after last year’s decline from the COVID-19 pandemic, although a global shortage of computer chips is “choking off” auto production during a period of high demand, according to a new economic outlook.
The updated Michigan economic outlook that Comerica Inc. issued today forecasts 6.0 percent Real GDP for the state in 2021, followed by 4.4 percent growth in 2022.
Vehicle sales hit an annualized rate of 18.5 million units in April, “yet, U.S. vehicle assemblies are being held down this spring by supply chain constraints, especially with computer chips,” Comerica economists wrote in the outlook.
“This is pulling new car dealer inventory down right at the time when job growth is accelerating and consumer confidence is increasing,” the outlook states. “Automakers shut down plants earlier this year with hopes of reopening them by May. However, some plant closures are being extended.”
A General Motors plant in Lansing, for instance, reopened in early May after closing for a month and a half, only to shut down again and possibly remain closed through June, according to the outlook. Economists noted that manufacturing employment in Michigan has been flat since September “despite other signs of economic re-awakening.”
Service industry jobs, after falling in the fall when the state imposed new restrictions, expanded in the first quarter.
“We expect manufacturing supply chain constraints to gradually ease through this year as productive capacity and shipping systems catch up with awakening global demand,” Comerica economists wrote. “We expect consumer spending on durable goods to remain strong this year as long as consumers can find the goods to purchase.”
Weak population growth will hamper long-term economic growth for Michigan, according to the outlook.
Comerica forecasts Michigan’s unemployment rate to ease throughout the year from 5.3 percent in the first quarter to 4.6 percent for the fourth. Housing starts will grow 18.4 percent in 2021, Comerica economists predict.