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GRBJ: Economists forecast slower growth trend in 2022

GVSU analysts present views from West Michigan business leaders at chamber’s annual meeting.

GRAND RAPIDS, Mich. — GRBJ—The economic confidence of business leaders across West Michigan is slipping as hurdles to growth mount, according to a recent presentation by local experts.

At the Grand Rapids Area Chamber of Commerce’s 134th annual meeting on Feb. 2 at DeVos Place, economists Paul Isely, professor of economics and associate dean in Grand Valley State University’s Seidman College of Business, and Kuhelika De, assistant professor of economics at Grand Valley, presented “The State of Grand Rapids Business,” an economic forecast they published with the support of data and perspectives collected from chamber members.

The report is based on a representative sample from a survey last fall of 1,000 organizations in Kent, Ottawa, Muskegon and Allegan (KOMA) counties.

“We were excited to match data from the Seidman College of Business with expert analysis from members in manufacturing, real estate, hospitality and employment,” said Rick Baker, president and CEO of the Grand Rapids Chamber. “Despite the uncertainty, there is a lot to be excited about in 2022, including continued growth. As we tackle these challenges and opportunities, the Grand Rapids Chamber will continue to have our business community’s back.”

Isely said business leaders are heading into 2022 with less confidence than last year. He added West Michigan businesses will continue to rebound from the pandemic, but growth will slow later this year due to a likely rise in interest rates.

“Surprisingly, what we’re finding in talking to business leaders across West Michigan is that they’re feeling less confident going into 2022 than they were going into 2021,” Isely said. “This is telling us that concerns over talent, prices, supply chain and the pandemic are creating uncertainty. COVID and COVID responses clearly shaped 2021 and will continue to do so into 2022.

“(Business executives) are worried about how much longer this will go on, and (they) wonder if they will have to worry about inflation, interest rates and finding labor for the next 12 months.”

Several factors, including a short COVID recession and $5 trillion in federal stimulus, contributed to slowing the projected growth rate, Isely said. These factors “superheated the economy,” which will correct itself and swing back like a pendulum, he said.

“If you pull it too far in one direction, it will correct in the other direction,” Isely said. “You can accelerate really fast for a short period of time but can’t do it for a long time. The economy corrects itself by using things like increases in prices in order to try to slow down.”

De said supply chain bottlenecks and low labor force participation rates will impact inflation, predicted by the Federal Reserve at 3% for 2022. However, De said her economic models show inflation measured by the personal consumption expenditures (PCE) price index at 3-4%, while inflation on the consumer price index (CPI) is at 4-6%.

The confidence index, tracking overall business confidence in KOMA, fell last year due in part to uncertainty, inflation and supply chain issues, Isely said.

Other findings from the GVSU economic forecast for 2022:

  • The Business Confidence Index for the end of 2021 was 72.4%, lower than expected last year.
  • The Forecast Business Confidence Index for 2022 is 70.5%, showing reduced expectations.
  • Employment is expected to grow by 2.6%-3.2%, showing similar growth to 2021.
  • Overall nominal sales are expected to increase by 2.3%-2.9%, a pickup in growth from expectations in 2021.
  • Wages are expected to increase by 4.4%-5.2%.
  • Prices are expected to increase by 5.9%-7.3%.
  • All indicators signal the West Michigan economy will show solid growth during the beginning of 2022, with growth slowing as the year progresses.

About 700 chamber members attended the event.

“We were so pleased to partner with the Grand Rapids Chamber on this event,” said Diana Lawson, dean of the Seidman College of Business. “Seidman faculty, led by Dr. Paul Isely, have compiled an outlook that will help inform the decisions made by West Michigan leaders.

“The Seidman College of Business has done an annual confidence index since 1995, and by partnering with the chamber, we are able to generate three times the number of responses.” The full economic forecast is at gvsu.edu/seidman/sbr2022.

This story originally appeared in the Grand Rapids Business Journal. 

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