West Michigan businesses rebound, but slow later as interest rates rise
GRAND RAPIDS — West Michigan businesses will continue to rebound from the pandemic, but Grand Valley State University researchers said growth will slow later this year due to a likely rise in interest rates.
Paul Isely, professor of economics and associate dean at Seidman College of Business, detailed his benchmark survey of the regional economy and forecast for 2022 during the “State of Grand Rapids Business” presentation on February 2, during the Grand Rapids Chamber Annual Meeting at DeVos Place. Kuhelika De, assistant professor of economics, collaborated with Isely on the report.
The data in the report is based on a representative sample of a survey conducted last fall of 1,000 organizations in Kent, Ottawa, Muskegon and Allegan (KOMA) counties. Isely said business leaders are heading into 2022 with less confidence than last year.
“It tells us that the extra year of COVID treatment has created uncertainty for them,” Isely said. “They are worried about how long this is going to last and whether they will have to worry about inflation, interest rates and the search for workers over the next 12 months. “
Several factors, including a short COVID-related recession and $5 trillion in federal stimulus, contributed to slowing the expected growth rate. Isely said these factors “have overheated the economy,” which will correct itself and swing back like a pendulum.
“If you pull it too far one way, it will correct the other way,” he said. “You can accelerate really fast for a short period of time, but you can’t do it for a long period of time. The economy corrects itself by using things like price increases to try to slow down.
De said supply chain bottlenecks and low labor force participation rates will impact inflation, forecast by the Federal Reserve at 3%. However, De said his economic models show inflation measured by the PCE price index (personal consumption expenditure) at 3-4% while the CPI price index (consumer price index) is at 4. -6%.
The Confidence Index, which tracks overall business confidence in KOMA, fell last year to 72.4%, in part due, Isely said, to uncertainty, inflation and concerns about Supply Chain.
Other findings from the 2022 Grand Rapids Economic Forecast:
• Employment is expected to increase by 2.6% to 3.2%, showing growth similar to 2021
• Wages are expected to increase by 4.4% to 5.2%
• Prices are expected to increase by 5.9% to 7.3%
• The forecast business confidence index for 2022 is 70.5%, showing reduced expectations.
The full article is posted on https://www.gvsu.edu/seidman/sbr2022.