Economist: Drop in business confidence as leaders worry about recession

Flat purchasing rates, continued supply chain issues, inflation cause growing pessimism.
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For the first time in eight years, respondents to a monthly supply chain survey reacted negatively to long-term business outlooks.

Flat purchasing rates, continued supply chain issues and inflation have caused business leaders to be pessimistic about the future, according to Brian G. Long, director of supply management research in GVSU’s Seidman College of Business.

Long

Long said for the first time in eight years, survey respondents reacted negatively to long-term business outlooks in The Institute for Supply Management monthly survey of business conditions, which includes 45 purchasing managers in the Grand Rapids area and 25 in Kalamazoo.

“We had a dramatic drop in the month of May as people in our survey indicated they are no longer as positive about the economy as they were,” Long said.

“We are concerned if this trend continues, it will mean hiring less people, buying less equipment and seeking fewer orders if they expect a recession is coming.”

Overall, most survey respondents still reported modestly positive sales, but higher prices, rapidly rising transportation costs and logistics bottlenecks cut into profits for many firms.

Most plans for expansion now are being put on hold, Long said, and many businesses continue to wrestle with personnel shortages.

Highlights from Long’s report are as follows:

  • New orders in May dropped to +14, from the April index of +29.
  • Production fell to +7, from the April index of +23.
  • Employment in May was +12; the April index was +14. 
  • The purchases index was flat in May, compared to +20 in April.

Survey respondents are from the region’s major industrial manufacturers, distributors and industrial service organizations.

The West Michigan survey is patterned after a nationwide survey conducted by the Institute for Supply Management. Each month, the respondents are asked to rate eight factors as “same,” “up” or “down.”

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