Local Economy Looking Up

    GRAND RAPIDS — According to data collected in the third and fourth weeks of June, the National Association of Purchasing Management (NAPM) is reporting that the economy is “definitely up.”

    NAPM’s index of business improvement edged up to 16 from 6, the best is has been in over a year. In a similar move, NAPM’s index of production came up to 10 from 2. In another pleasant surprise the employment index turned positive at 10, up from –8.

    The index of purchases remained negative, however, at –2, although the decline rate was less than the –10 in the previous report.

    “All in all this report represents the positive numbers that we had been predicting since the presumed end of the war in Iraq,” said Brian Long, CPM with NAPM. “The bad news is, of course, that just one good report does not guarantee a trend. We will need at least two more good reports before we can declare that we are finally out of the doldrums.”

    Long noted that when looking at the individual industries, convalescence in the steel furniture industry is still on track. Automotive ended the month with slightly better business conditions, largely because of last minute end-of-year orders, Long said. And while mixed in performance, capital equipment came in slightly positive.

    “Overall there was no stellar performance for any one industry, even though the bias was to the upside for most groups,” said Long. “And with the recent rise of unemployment to 6.4 percent, many people are still wondering if things are getting worse. Although nothing but death and taxes are ever certain, it is still fair to conclude from our current data that the economy will probably be on track for a modest recovery for the next six months and beyond.”

    Long said it will probably take the country well into October before it starts to see some significant improvement in the unemployment rate for the nation as a whole.

    For the NAPM business survey, however, the Grand Rapids area has already turned positive at 10.

    “Much as expected, the Federal Reserve cut interest rates by a quarter percent at last month’s meeting,” said Long. “Although there has been debate regarding whether the cut was necessary, it can be argued that the quarter point cut was just enough boost to ensure that our numbers continue on their present upward path. The downside of the rate drop is, of course, that the Fed has used up all of its dry powder. In the event of another terrorist act, there is very little left for an economic cushion to halt a downward slide.”

    At this time, Long said, his best guess is that it may be many months before there is an increase in interest rates. He added that it is somewhat disturbing to see that the list of items rising in price continues to grow, and that more than half of those items are petroleum related.

    “Our indexes of prices remain very tame at positive 8 for the Grand Rapids survey, -4 for southwestern Michigan and 13 for the ISM national survey,” said Long. “All of these numbers indicate that non-petroleum inflation is not a problem at this time. What would help now is a decline in the price of petroleum to help us overcome this problem.”           

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