Published in Economic Development

Index shows West Michigan economy returns to growth after ‘substantial dip’

BY Sunday, September 08, 2019 02:53pm

A monthly index of West Michigan’s economy returned to “moderate growth” in August after taking what economist Brian Long calls a “substantial dip” a month earlier.

Key indices for sales, production, employment and purchases all moved back into positive territory last month, after registering negative for July.

Long, the director of supply chain management research at Grand Valley State University’s Seidman College of Business, noted in his latest report that comments from industrial purchasing managers who answered his monthly survey “continue to be mixed, although the mood continues to drift in a more cautious direction.”

The biggest worry is how the trade war with China will play out, according to Long.

“There is no obvious event that could trigger a recession at this time, except if the trade war should get out of hand. The world economy continues to slow, and the U.S. will eventually be drawn into the slowdown,” Long wrote in his report for August. “Hence, we could see several quarters of GDP growing in the range of one percent or so. If, by some miracle, a trade agreement is soon reached with the Chinese, confidence in the entire world economy would benefit, and the U.S. and Chinese economies would rebound. But the operative word is ‘if.’”

Long’s monthly report is based on surveys with purchasing managers in Grand Rapids and Kalamazoo.

Even amid trade tensions, the short-term outlook for the next three to six months among survey respondents “tiptoed up” in August from a reading of positive 6 to positive 15. The long-term outlook index for the next three to five years remained strong at positive 28, up three points from July.

“Just like most months, both of these indices are heavily influenced by the current news cycle. Hence, the West Michigan survey respondents apparently do not see any major shift in the current outlook,” Long wrote.

An economic alert issued today by Comerica Inc. noted the weaker-than-expected net gain of 130,000 U.S. payroll jobs for August. That adds to the expectations that the Federal Reserve’s Open Market Committee will again reduce interest rates when it meets Sept. 17 and 18, according to Comerica economists.

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