The November Supply Management Survey of west and southwest Michigan Purchasing Managers reveals the local economy is softening.
There are signs of strength in employment and manufacturing output. As supply chains return to normal, that translates to a slight decrease in demand. Industrial prices are falling, but it could be months or years before lower prices reach the consumer. Inflation remains the culprit. Taming it will take time as the Federal Reserve continues raising interests.
Brian G. Long is director of Supply Management Research in the Seidman College of Business at Grand Valley State University says the Fed is taking aim at home prices.
“Well, with the skyrocketing value of homes in certain parts of the country, we've unfortunately created another housing bubble, and about 40 percent of the consumer price index is the cost of owning, renting, and otherwise operating a home. So, we're going to need to see the prices for homes come back down to normal before we're going to see inflation come back to normal.”
Long says expect the Fed to continue raising rates slowing the economy but not collapse it.
“I still think we'll roll into a recession sometime in 2023, and I agree with the other forecasters that the recession will probably be quite mild. That's the good news. The bad news is that a mild recession will make it harder for the Fed to rein in inflation, and I fear that we could get into another one of these wage-price spirals and that the result could be inflation staying unacceptably high for the next five years or even longer if the Fed does not take decisive action.”
Long adds the Fed must take decisive action.
