GRAND RAPIDS – After six months of disappointing car sales, the impact on local auto parts suppliers is finally being felt by the West Michigan economy, a Grand Valley State University expert said.
The survey’s index of business improvement (new orders) came in at +8, considerably below last month’s +31. The production index eased to +6 from +26. The index of purchases tapered to +12 from +22, and the employment index is still very positive, falling slightly to +20 from +23. The findings in the survey are based on data collected during the last two weeks of July.
“It’s not a collapse, just a modest tapering of the growth rate. Growth is still growth,” said Brian G. Long, director of Supply Management Research in the Seidman College of Business.
Long said business conditions for the auto parts suppliers have turned mixed, based on the specific car or truck lines companies are supporting. Some have been forced to cut production because of slow vehicle sales.
“For the sixth straight month, auto sales for July are lower,” said Long. “The 6.9 percent drop is the largest so far this year, although most of the decline came from a 15 percent drop in the sale of sedans (regular cars) verses a 1.9 percent drop in light trucks and SUVs.”
With the production of 2017 models now finished, Long said analysts are still worried about the bloated dealer inventories which are much higher than they were before the Great Recession. Compounding the problem is the large number of vehicles coming off lease.
Long said the office furniture industry is still stable while the capital equipment market remains mixed, and the slowdown in the auto parts industry has resulted in the cancellation of further expansion by some firms. He said many segments of the West Michigan tourist industry are poised to have a record year, and the agricultural industry will have a good year as well.
The Institute for Supply Management survey is a monthly survey of business conditions that includes 45 purchasing managers in the greater Grand Rapids area and 25 in Kalamazoo. The respondents are from the region’s major industrial manufacturers, distributors and industrial service organizations. It 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.”