West Michigan’s economic fundamentals remain positive in the April Institute for Supply Management survey. However, supply chain issues and inflation are raising concerns a recession is approaching.
Purchasing managers surveyed from Grand Rapids to Kalamazoo are reporting employment, purchasing, production and new orders all remain in positive territory.
But for how much longer? Persistent supply chain bottlenecks impacting shipping ports, rail and trucking are creating shortages concerning economists.
“We had hoped that it would have straightened out by this time, but it has not.”
Brian G. Long is director of Supply Management Research in the Seidman College of Business at Grand Valley State University. He says businesses are willing to pay more, but not any price.
“And so, this causes them to hoard and this is happening with a whole bunch of our industrial commodities.”
Think steel and other alloys. And producers are hanging on to inventories as prices rise.
A toxic mix sending the inflation rate to a 40-year high. The Federal Reserve is increasing interest rates attempting to tame it and prevent a recession. Long doesn’t believe the current pace of ½-point increases will do the trick.
As inflation rises, workers demand more money. It’s called the wage-price spiral. Long says the only way to cure it is to crank up interest rates until the inflation stops.
“Unfortunately, this will result in a recession if this comes to this point.”
But at this juncture, Long says it may be unavoidable.
