West Michigan’s economy took an expected turn into a “shallow recession” in October. (Photo from Pxhere.com)
West Michigan’s economy took an expected turn into a “shallow recession” as area manufacturers are reporting inflation-related headwinds and a slow-down in demand, according to an October survey of purchasing managers by Grand Valley State University’s Seidman College of Business.
Brian Long, director of supply chain management research at Seidman, said the downturn came as no surprise, with local results mirroring national ones.
“If we compare our statistics with those being collected at the national level, we see a pattern of economic erosion with higher interest rates around the world and the ongoing war in Ukraine,” Long said. “We can probably expect both our local and national statistics at the industrial level will probably continue to soften.”
The key new orders index made a turn into double-digit negative territory for the first time in 30 months, amid inflationary pressures, softening demand and uncertainty in the market.
Employment and purchasing indices also were in negative territory, with an increasing number of companies reporting investments in those areas were down versus the previous month.
Meanwhile, production, or gross output, grew during October as some manufacturers continue scrambling to meet demand in sectors like the auto industry, where supply chain issues have hampered business growth.
“Just like last month, the market for office furniture has continued to soften, but pent-up demand for new cars will most likely keep our West Michigan auto parts suppliers and the assembly lines running for the foreseeable future,” Long said. “The comments from our survey participants have now turned increasingly tenuous, and some firms are openly bracing for an impending recession.”
More information about this month’s survey results and an archive of previous survey data is available at the Seidman College of Business website.
As the holiday shopping continues, local West Michigan businesses find acquiring merchandise for shoppers more challenging than usual due to far-reaching economic effects of the COVID-19 pandemic.
Meyer Music is no stranger to these struggles. A third-generation family-owned music supply and repair store, owners Joel Hoekstra and his wife Lindy have felt the long-lasting effects of the pandemic in several ways over the last 18 months.
Meyer Music, a third-generation family owned business in Kentwood, is no stranger to supply chain struggles.
When COVID-19 first appeared in the United States, the main concern for the Hoekstras was the safety of local students. “Much of what we do is dependent upon people blowing air,” Joel Hoekstra said. “We had to question—can playing an instrument be safe for students?”
Specially made masks with slits for instrument mouthpieces and bell covers for wind instruments were just some of the solutions Meyer Music implemented.
However, as months passed with no end to the pandemic, the Hoekstra family, like many other retailers, began to face merchandise supply issues.
“We haven’t had as many issues as some retailers,” Hoekstra said. “Due to the nature of our business, we always have to plan far ahead. When we realized there were issues with the supply chain, we began ordering even further in advance.”
Getting shipments from warehouses in the United States is pretty quick, Hoekstra said, but supplies from Asia take much longer, with shipments remaining on the water for up to 90 days before making it to land. Inflation has prices surging for everyone, causing suppliers to prioritize higher priced items for shipping and often leaving smaller goods behind because they are too expensive to ship to the U.S. Hoekstra acknowledged that once the U.S. warehouses are depleted, finding supplies will become more challenging.
“This puts a different strain on the system than we’ve ever seen before,” he said. “There are unprecedented amounts of instruments and products on backorder.”
Educators have been understanding, Hoekstra said, adding “We have good relationships with teachers and are always truthful with them.”
Meyer Music customer Matthew Reed, who is the band director for Central Montcalm Public Schools, certainly understands.
“Supply chain issues have impacted purchases and instrument supplies,” Reed said. “I’ve ordered new instruments and can’t even get an estimated arrival, and had to be flexible on how quickly smaller items are available. Flexibility and patience are definitely required at the moment. Along with ordering early.”
Hoekstra believes the supply chain issue is still 18 months from any form of resolution. To counteract it, Hoekstra said he plans to continue his aggressive approach to staying ahead of the supply issues, placing big orders for store merchandise now instead of his usual timeline of January-March.
Not allowed to be open during the pandemic shutdown, West Michigan Bike & Fitness’s first day of business had other out-of-state shops calling to see what inventory the store had.
During the pandemic, the federal government considered bike shops essential because bikes are viewed as a mode of transportation. However, “Michigan is the only state in the nation where bike shops were not deemed essential,” said West Michigan Bike & Fitness sales manager Geoff Kuyper. “April 25, 2020 was the first day bike shops were allowed to open in Michigan after a seven-week closure. Any store with available inventory was sold out within two weeks.”
In fact, that first day, approximately 50 percent of the calls West Michigan Bike & Fitness received were from out-of-state retailers, who were able to stay open, looking for inventory because they had depleted resources.
“Not only was the significant demand causing delays on parts and productions, there was a shutdown overseas at the beginning of the pandemic where they didn’t ship,” said Geoff Kuyper, West Michigan Bike & Fitness sales manager. “Stores ran out of inventory at that time.”
Like Hoekstra, Kuyper said he doesn’t see the supply issue stabilizing until fall of 2023. “Most stores only have one model (of bike) to show. Some models are backordered 12 to 18 months, some are backordered until 2024,” he said.
Taking a page from car dealerships that recommend pre-ordering, Kuyper said pre-ordering is the only way to get something specific, but consumers have to be willing to wait. If a person needs something more quickly, then Kuyper suggested not looking for a specific model, but simply asking stores what they have on hand or what models stores can obtain on a faster timeline.
Though the supply chain issue is ongoing, both Kuyper and Hoekstra are staying positive.
“It’s better than it was,” said Kuyper. “The last two months have improved our position dramatically.”
While for Hoestra it is a matter of unity and support: “We are in this together. Local businesses are doing everything we can to support our local communities.”
In West Michigan and across the country, supply chain problems have resulted in longer lead times, missed deliveries, higher prices and sometimes exorbitant expediting charges, said Brian G. Long, director of Supply Management Research in the Seidman College of Business at Grand Valley State University.
Long surveyed local business leaders and his findings below are based on data collected during the last two weeks of October.
“What seems most worrisome to some of our survey participants is that there is still no end in sight for our supply chain problems. Although these supply chain gremlins are inhibiting the West Michigan economy, modest economic growth continues,” Long said.
Most automotive manufacturers are extremely frustrated by the fact they cannot build or ship most of their cars because of a shortage of $15 worth of computer chips, Long said.
“Throughout the chip crunch, automakers have prioritized output of large pickups, some of the industry’s most profitable vehicles,” he said. “Ford and Ram are among automakers offering zero percent financing for 72 months on large pickups. At the same time, competition in the segment is increasing with a redesigned Toyota Tundra and the industry’s first electric pickup, the Rivian R1T, on the horizon.”
Addressing inflation, Long said the Federal Reserve is still sticking with its theory that the current inflation is “transitory.”
“They won’t say how long before we can expect to ‘transition’ out of the high inflation we are currently experiencing,” he said.
Highlights of Long’s October report:
The Index of Employment remained positive at +24, down from +27.
New orders, or the Index of Business Improvement, rose to +15 from +8.
The Production Index, or output, rebounded sharply to +19, up from -1.
The Index of Purchases eased to +8 from +14.
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.”
D.A. Blodgett-St. Johns Communications Specialist Allyssa Murphy stands with boxes of toys received in last year’s D.A. Blodgett-St. Johns Virtual Toy Drive. This year’s drive is being held through Nov. 22. (Supplied)
By Sheila McGrath WKTV Contributing Writer
With shortages happening now in everything from groceries to computer chips to toys, D.A. Blodgett-St. Johns is hoping donors will get in the holiday spirit a little early this year.
Due to Covid-19-related supply chain issues and shipping delays, the nonprofit agency is closing its annual toy drive on Nov. 22, a few weeks earlier than usual. The drive, which opened on Oct. 1, provides gifts for children receiving services from the agency.
DABSJ, a Grand Rapids-based agency, provides services like foster care, adoption, family preservation, and children’s residential treatment.
“We help around 7,000 kids each year, and about 500 of those are kids we provide holiday gifts for,” said Allyssa Murphy, communications specialist with the agency. “Some of them are in foster homes, so they are not with their biological families. Some are in low-income households. We work with each social worker on our team and figure out who is in need and exactly how we can help.”
Closing the drive early will help ensure the gifts get in the hands of kids before the holidays, Murphy said. The gifts need to be shipped to the organization, then distributed to social workers, who get them to the families they support.
This is the second year the toy drive is being held virtually due to the pandemic. Donors can log onto the Virtual Holiday Gift Drive through a website called Roonga to view the gifts that are needed and decide what they might like to donate.
Toys received in last year’s D.A. Blodgett-St. Johns Virtual Toy Drive await distribution to West Michigan children. (Supplied)
Murphy said the vendor they are working with through Roonga put a limit on the number of certain toys they could request due to item shortages. Also, their contact at Roonga suggested they end the drive early to make up for expected delays due to a shortage of delivery drivers.
The toy drive site features items for all ages and price ranges along with basics like socks, underwear and hygiene kits, which are especially important, Murphy said.
“They’re not necessarily the most fun items, but they are necessary, and the kids we support really do need them,” Murphy said. “Gift cards are probably the highest needed item. That really makes up the difference for some families.”
Through Roonga, DABSJ has partnered with a third-party vendor that provides all the toys at wholesale prices, Murphy said. DABSJ typically gives a $50 gift card and at least three gifts per child, depending on how many gifts are donated.
“Sometimes we get more, sometimes less, but we try to give as much as we can,” Murphy said.
DABSJ President and CEO Mary Muliett said many of the kids they help have experienced some type of trauma, and the pandemic has not made things easier.
“These kids need our help now more than ever,” Muliett said. “They deserve a positive and magical holiday season, just like any other kid. We need help making that happen.”
To donate to the holiday gift drive, visit the drive webpage or dabsj.org. For more information or to discuss donation options for businesses, contact Allyssa Murphy at amurphy@dabsj.org.
