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Left: Kurt Rankin, right: Doug Rothwell Left: Kurt Rankin, right: Doug Rothwell COURTESY PHOTOS

Surveys point to economic optimism despite cooling growth forecasts for Michigan

BY Sunday, November 03, 2019 01:28pm

Business owners surveyed by PNC Bank remain optimistic about the local and national economies, despite worries about tariffs and pricing pressures and outlooks for slower growth ahead.

Nearly four in 10 respondents told PNC Bank that they were “optimistic” about their local economy over the next six months, a level that compares to a record high of 45 percent in the fall of 2018. Another 52 percent said they were “moderately optimistic.” 

Nationally, 46 percent of small and mid-sized business owners were optimistic about the U.S. economy — a record high for PNC’s Michigan survey that’s a single percentage point above sentiment expressed a year ago — and 41 percent were moderately optimistic.

That level of optimism in the semi-annual survey comes as a PNC economist predicts slower economic growth for Michigan in 2020 “as job creation cools.”

“Michigan’s economic growth looks set to weaken somewhat in 2020. The state will likely be hit disproportionately by a manufacturing-centered slowdown impacting much of the nation,” PNC economist Kurt Rankin wrote in his report on the survey results.

Hiring will not keep pace with participation in the labor force, Rankin said. He noted that year-over-year payroll job growth slowed to 0.4 percent from June to August, the slowest rate since May 2010.

Amid that slower growth, 53 percent of business owners answering the PNC survey said they were optimistic about their own businesses, versus 56 percent a d year ago, and 43 percent were moderately optimistic.

Nearly half of respondents expect their sales and profits to increase, although expectations did shift from what PNC termed growth to stability as respondents projected lower needs for financing, and reduced capital spending and cash flow. Only two in 10 respondents expected to hire more employees.

More than half expect to pay higher prices to suppliers in the next six months and four in 10 will raise the prices that they charge customers.

Looking ahead, 36 percent of business owners surveyed by PNC expected a recession by 2020 and 38 percent see one occurring by 2021.

Meanwhile, the latest Michigan Economic Activity Index released this week from Comerica Bank increased to a level of 118.3 in August. Seven out of the nine indicators tracked in the index were positive for the month, with total state trade in negative territory and hotel occupancy flat for the month. 

Comerica says it’s “conceivable” that the effects of the General Motors strike will affect the index for October when it is released. 

“We already know that payroll employment for the state dropped in September, down by 5,700. We expect October payrolls to show a much larger decline as the full weight of the strike shows up in the numbers, along with disruptions to non-unionized workers farther up the supply stream for GM. Also, there may be tertiary effects depressing hiring in service industries, including restaurants,” according to the Comerica report, which noted expectations for stronger index readings for November numbers and into early 2020. 

In a sentiment survey issued by Business Leaders for Michigan two weeks ago, 58 percent of respondents expected the U.S. economy to stay the same over six to 12 months and 37 percent see it worsening.

Nearly half believe the state economy will stay the same and 46.5 percent expect it to get worse. Executives remained optimistic about their projections for future capital investment and job growth.

“Michigan business leaders are a little less enthusiastic about their own future investment during the next six to 12 months,” Business Leaders for Michigan CEO Doug Rothwell said. “While most are not yet anticipating any reduction in their employment levels, fewer job providers are coming down on the side of growth. Is it time to worry? Not yet, but we need to have some critical conversations about what lies ahead.”

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