The economic freefall from the COVID-19 pandemic may have already bottomed out for the manufacturing sector in West Michigan, according to a monthly survey and activity index.
While the results of economist Brian Long’s May survey with industrial purchasing managers in Grand Rapids and Kalamazoo produced activity indexes that remain well in negative territory, they were better than April. Long’s report for last month says “it now appears that the worst is over and the recovery has begun.”
“Yes, some stores are starting to reopen, some factories are resuming production, and some COVID-19 statistics are improving. Barring a relapse in the fall, it now appears that history will record either March or April as the bottom of the 2020 Recession. Assuming that the current civil unrest does not get out of hand, we can expect some additional improvement in next month’s report,” Long, director of supply chain management research at Grand Valley State University’s Seidman College of Business, wrote in a report on the May survey results.
However, a full recovery by the third or fourth quarter “seems highly unlikely at this time.”
“It is worth repeating that we do not consider a recession to be over until we return to full employment, which took about seven years for the complete recovery from the Great Recession,” he said.
In the report for May, key indexes for sales, production, employment and purchasing each remained negative but were better than April. The sales index went to minus-32 for May from a minus-42 in April, and the index for production went from minus-48 to minus-35.
The employment index improved three points to minus-38, and an index for purchases registered a 12-point improvement to minus-32.
“Just as last month, many of our survey participants are still working from home or working on a reduced office-sharing schedule,” Long wrote in his report. “It seems obvious that many of our supply chains have been shaken, and restarting production will not always be easy. As business around West Michigan continues to reopen, we can expect next month’s statistics to continue to slowly improve.”
The short-term outlook of three to six months registered a strong 32-point improvement from April to May to come in at minus-15. The long-term outlook of three to five years that had remained positive improved as well by 17 points to 32.
Long noted that the improvements on the short- and long-term outlooks in the region for May came after “two disastrous months” and follow an improvement in consumer confidence nationally.
“The fact that most measures of business and consumer confidence have quit sliding and are starting to improve is an additional sign that the recovery has begun, although the road back to the confidence levels of 2019 will take considerable time,” the report states.