The economy continued “chugging along” in West Michigan during the early spring, even as economist Brian Long’s monthly survey of industrial purchasing managers again found signs of slower growth.
Activity indexes for sales and employment both declined in April, while indexes for purchases and production improved.
The short-term outlook for the next three to six months among purchasing managers in Grand Rapids and Kalamazoo improved as well in April from May. The long-term outlook for the next three to five years remained steady.
Long noted some survey respondents reported their businesses were beginning to slow.
“They’re not talking about a major cutback of any sort, they’re not talking about any layoffs of any sort, but they are looking at a slower pace for the rest of 2019,” said Long, the director of supply management research in Grand Valley State University's Seidman College of Business.
The employment index from the April survey did represent a 27-month low at +4, but it remains in positive territory and close to the 25-year average of +8. The employment index has been running in the double digits for the last two years. The move into single digits indicates that employment continues to grow regionally, “but at a much slower rate,” Long said.
National findings show economic growth continues to ease as well, but Long does not see any signs of a looming downturn.
“Although there are some significant signs that growth is slowing, there is still no sign that we are about to slide into a recession,” Long wrote in his report. “We know the world economy is slowing, and that this slowdown will ultimately have at least some impact on our domestic economy. However, various industries are starting to grow ‘bubbles,’ which we hope will not all break at once. Unlike the dot-com bust or the housing crisis, there is no apparent major catalyst for a recession at this time.”
One caveat to that is a trade war with China that “could generate a significant slowdown or even a recession if the war drags on.”
“If the trade war becomes too severe, unfortunately I have to say that this is the beginning of our next recession,” Long said.
An outlook Comerica Inc. issued this week said findings “are indicative of a somewhat nuanced U.S. economy.” GDP growth for the first quarter was much stronger than anticipated at an estimated 3.2 percent annualized rate, “however, some of the underlying data was weak,” Comerica economists wrote. They specifically cited soft consumer spending and a housing market that “continued to slide.”
Comerica predicts 2.6 percent Real GDP growth for all of 2019, with a 1.6 percent rate in the second quarter alone, and 2.4 percent for 2020. The firm projects auto sales will continue to ease from 17.2 million units in 2018 in North America to 16.7 million units this year, and further dip to 16.4 million units in 2020.