West Michigan’s economy plodded along to start 2019, growing slowly as it has been for a decade, according to economist Brian Long’s monthly survey of industrial purchasing managers.
Key indexes for new orders and purchases in Long’s report for March eased from February and the index for production “retreated” but remained positive.
Like the U.S. economy, growth is slowing in West Michigan, said Long, director of supply chain management research at Grand Valley State University’s Seidman College of Business. He expects the U.S. economy to continue on its present pace toward slower growth.
“As I’ve mentioned many times before, there is no apparent factor/event on the horizon that can generate a recession,” Long wrote in his report for March. “However, between the slowing world economy, Brexit fears, slowing auto sales, and slippage in our index of short-term business confidence, there is plenty of evidence to suggest that the economy may enter a pattern of slow or nearly flat growth.”
Long, whose monthly report is based on surveys with industrial purchasing managers in Grand Rapids and Kalamazoo, noted the U.S. auto sales continue to ease, although parts suppliers in West Michigan “are still not feeling pinched.”
“Just as it has been for many months, the decline in auto sales has been very orderly — so far,” he wrote.
Long’s index for short-term business confidence over the next three to six months faded in March, registering +8 compared to +22 in February. The index for long-term business confidence for the next three to five years held steady in March at +28, up one point from the prior month.
Nationally, the University of Michigan’s latest U.S. economic outlook issued in mid March predicts 2.4 percent growth in Real GDP for all of 2019, with a growth rate of 2 percent in the fourth quarter alone. The U.S. economy recorded Real GDP growth of 2.9 percent for 2018.
U-M economists predict further easing of economic growth into 2020 with a forecast for 1.8 percent growth in Real GDP.
Light vehicle sales should ease to 16.9 million units in North America for 2019 and slip to 16.8 million in 2020, according to U-M’s updated outlook. That compares to 17.2 million units sold in 2018.
Other economic outlooks generally predict slower economic growth for the U.S., putting the recovery since the Great Recession at a record 10 years as of this coming July. Some outlooks also foresee a rising possibility of another recession in the years ahead.
Comerica Inc., in its updated outlook issued in mid March, predicts 2.5 percent growth in Real GDP for 2019 and 2 percent in 2020. PNC Bank’s March outlook projected 2.3 percent growth in Real GDP this year and 2.1 percent next year.
The risk of a U.S. recession rises in 2020 and 2021, PNC economists wrote in their updated outlook, as the economic stimulus from higher federal spending and tax cuts at the end of 2017 fades, “making the economy more vulnerable to an external shock.”
PNC economists project the probability of a recession beginning by 2020 at 30 percent, and 50 percent by the start of 2021.
“The baseline forecast calls for continued, albeit slower, economic growth over the next five years, because it is difficult to predict exactly when a recession will begin,” according to the PNC outlook. “But at some point over the next few years a recession will likely occur through some combination of economic excess; a policy mistake, either by the federal government or the Federal Reserve; and an external shock.”
The Federal Reserve Board’s latest outlook projects 2.4 percent growth in Real GDP for this year, 1.9 percent in 2020 and 1.8 percent in 2021. The Federal Reserve’s updated outlook followed a March 20 decision by the Federal Open Market Committee to hold interest rates steady, perhaps through the rest of 2019.
A quarterly survey by the National Association of Business Economists generated a less optimistic outlook in March than three months earlier with a projection of 2.4 percent growth in Real GDP for 2019 and 2 percent for 2020.
Responses to the NABE survey placed the chances of a recession starting in 2019 at about 20 percent, and 35 percent by the end of 2020.