The U.S.-China trade war that began a year-and-a-half ago is, as Brian G. Long is director of Supply Management Research in the Seidman College of Business at Grand Valley State University puts it, “catching up with the West Michigan economy,”
“Well, the biggest slowdown that we had in this month’s survey, is of course, that our index of new orders coming into the firms. This is the first time that we’ve gone negative in a long, long time now and it’s a concern to us because new orders is the leading edge. Obviously, after we get new orders, they start ordering materials, hiring more people, machinery, all that kind of stuff, and when that goes negative it tells us that we’ve hit a major speed bump as far as this current recovery from the great recession is concerned.”
The new orders index swung from +10 in June to -13 in July. We asked Long to characterize the “speed bump” because it’s a pretty big swing.
“It is and I think part of it is driven by the news cycle because, as I said, there was still that feeling out there that an agreement might be just around the corner. Even as recently as the news that the talks were resuming. Now that the news has come out we’ve said, ‘Wait a minute’ nobody is even talking about the optimism that had come out of the talks some time earlier, and in fact just the opposite of the news that we seem to be getting out of it is that we’re nowhere near an agreement.”
Long adds that one negative monthly report does not constitute a trend. August orders will be critical as Long continues monitoring the trade war, a global slowdown and Brexit.