Published in Manufacturing

West Michigan industrial index plummets amid fallout from GM strike, tariffs

BY Friday, November 08, 2019 01:23pm

Key indexes for industrial activity across West Michigan recorded big declines for October that economist Brian Long partly attributes to the lengthy United Auto Workers strike again General Motors.

Toward the end of the strike, auto suppliers in West Michigan began to feel the effects and had to idle some workers, according to results from Long’s monthly survey of industrial purchasing managers in Grand Rapids and Kalamazoo.

“The October comments from our survey participants overwhelmingly refer to the negative impact of the G.M. strike. Now that the strike is over, we will hopefully see considerable improvement in our November statistics,” Long, director of supply management research at Grand Valley State University’s Seidman College of Business, wrote in his monthly report.

In the report for October, indexes for sales, production, employment and purchases all declined sharply. Sales, production and employment indexes that had been in the single digits in September fell last month to negative double digits.

The six-week GM strike came at a “vulnerable time for the state economy as other sectors outside of durable goods manufacturing showed signs of cooling this year,” Comerica Inc. economists wrote in an updated outlook for Michigan that came out today. “We expect to see cooler growth in the Michigan economy in 2020.”

Comerica projects 1.1 percent Real GDP growth for Michigan in both the fourth quarter of 2019 and first quarter of 2020. Boosted by a strong 3.9 percent start to the year, the state’s Real GDP growth should average 1.7 percent for all of 2019, which compares to 2.7 percent for 2018. Comerica expects the state’s Real GDP to decline further in 2020 to 0.5 percent.

Unemployment will remain low in 2020 even as Comerica projects North American auto sales to continue cooling, contributing “to near stagnant overall job growth for Michigan heading into 2020.”

In Long’s report for October, the short-term business outlook among industrial purchasing managers for the next three to six months also declined in negative territory. The long-term business outlook for the next three to five years improved in October from the previous month.

“Some of our local firms are starting to feel the pinch from this trade war that’s going on with China and so we have to be a little bit less optimistic about what the industry looks like going forward,” Long said. “It has been encouraging to see some apparent minor progress in the trade talks with China, although numerous other economic problems still abound.”

A trade deal with China could provide a “modest bounce” economically to the U.S., he said.

Despite some of the issues with the economy, current indications nationally “still point more toward more stagnation rather than a recession,” Long said.

In the office furniture industry, a key part of West Michigan’s economy, an activity index for the third quarter prepared by Michael Dunlap & Associates Inc. declined to 58.33 as of October, well down from a reading of 74 in July. The personal outlook among industry executives declined as well, to 57.37 in October from 64.00 in July.

The firm expected tariffs to affect the industry through the fourth quarter of 2019 and into the first quarter of next year. 

National economic outlooks generally expect growth in the U.S. economy to continue to ease through 2020.

Comerica’s latest U.S. economic outlook issued earlier this week projects Real GDP growth to slow to 2 percent next year. That compares to an expected 2.3 percent growth rate for 2019 and the 2.9 percent expansion recorded in 2018.

Comerica puts the chances of a recession at 25 percent within six months and 45 percent within a year. Longer term, the chances of recession grow to 55 percent within two years and 65 percent within three years, according to Comerica’s economic outlook.

Read 2172 times