Economic Outlook Bleak
Confidence in the local economy has hit its lowest level in the 13 years that Grand Valley State University economist Hari Singh has been conducting his annual economic outlook survey. Similarly, the business confidence index for West Michigan has dipped below 50 for the first time in the survey’s history.
The majority CEOs in metro Grand Rapids who participated in the recent survey don’t see much of a turnaround in sight, Singh noted. West Michigan had not completely recovered from the 2001 recession, and now it’s in the midst of another prolonged recession — and in for some additional hammering, Singh said at the 2009 West Michigan Economic and Commercial Real Estate Forecast Breakfast at DeVos Place this morning.
Nationwide, the consumer confidence level was 44.7 percent in November, and it slipped to an all-time low of 38.0 percent in December.
There will be continuing weakness in various sectors of the U.S. economy, particularly manufacturing. New orders for manufacturing have contracted for the last 13 months and that sector will continue to lose a significant amount of jobs. Singh predicts manufacturing will continue to consolidate, get leaner and become more productive. This year GDP will fall by 1 to 2 percent, the GVSU data indicates, and unemployment will crest at 10 percent.
The bright spot in the economy is exports. While other economists have forecasted a 5 percent growth in exports, Singh said that’s too optimistic: He believes growth will be closer to 2.8 percent.
U.S. employment continues to decline, with 584,000 jobs lost in November and 524,000 lost in December. The unemployment rate clocked in at 7.2 percent in December. Singh expects employment will fall by 1 percent this year.
Singh anticipates the contraction will continue throughout most of this year. The federal government will have to be a main driver in the effort to put a stop to the contraction and it already has the pedal to the floor, he observed. The proposed stimulus package would help because it would increase aggregate consumer demand for products and services, just as it did following the distribution of stimulus checks in 2008. But don’t expect to see the first signs of growth until the tail end of the year, Singh cautioned.