Friday, January 12, 2007

Economic forecast may have some good news

Glimmers of hope here in West Michigan. Perhaps we can be a model for the rest of the state.

GRAND RAPIDS--Forecasting the economy can be tricky business according to Grand Valley State University Economist Hari Singh. Friday, Singh releases his 2007 forecast of the West Michigan economy. Last year, Singh came pretty close to predicting local economic growth. He forecast that the local economy would grow .5 percent it came in at .6%.

Singh has been forecasting the local economy for 11 years. That has given him enough data to show trends and this time there are trends heading in a positive direction.

"About 70 percent of the losses in manufacturing have been, in terms of employment, regained by other expanding sectors," says Singh. The other good news is that it looks like the loss in manufacturing has bottomed out.

There has to be a point where, those that can leave for cheaper labor, have already done so.

And here is a new factor to consider-

For the manufacturers who have survived, Singh says the prospects look bright for about one third of them. That's because they export overseas, where the dollar is now weaker and American imports are considered a bargain.

See? We just have to keep driving the dollar down. ;-)

Eventually there will be balance; it may take decades to get there though.

Signs of good news from the automotive industry too. Forecasts for GM are looking up-

The upbeat picture General Motors Corp. executives painted for Wall Street on Thursday is a far cry from a year ago when company leaders were scrambling to explain a disastrous $10.6 billion loss.

If predictions for 2007 prove true, the world's largest automaker will shave losses, bolster spending on new products and grab market share in competitive world markets.

Invest, and make products people want to buy. Didn't we learn this lesson in the 80's?

In 2007, GM will bank on a new product assault to drive up sales, while increasing capital spending by up to $1 billion this year. Much of that money will go toward improving powertrains and increasing capacity in emerging foreign markets.

"This is a global business, we've got to play the game globally," said Fritz Henderson, GM's chief financial officer. "And we win with new products."

GM has increased capital spending by about $1.5 billion over the past two years to just under $8 billion. The goal is to spend from $8.5 billion to $9 billion in 2007 and 2008.

The spending increase backs up GM's latest mantra: that cost-cutting won't help unless the company starts turning out more popular and profitable products. The goal is to have newly introduced vehicles account for nearly 40 percent of showroom sales this year as it rolls out products designed to revive its brands and image.

Will global investment help us here in Michigan? Time will tell. See dollar quote above.

Ford is investing right here.

DETROIT, Jan 9 (Reuters) - Ford Motor Co. said on Tuesday it will invest $866 million to upgrade six plants in Michigan to help produce more fuel-efficient vehicles.

The investment comes as Ford moves to close 16 facilities in North America and cut nearly 45,000 jobs to return the region to profits.

The investments include $130 million for a stamping and assembly plant in Wayne that makes the Focus small car, $320 million for a transmission plant in Van Dyke, $88 million for a transmission plant in Livonia, and $208 million at a Dearborn plant that produces the F-150 pickup truck.

IF we can return the automakers to profitability and diversify our economy at the same time, we should be in pretty good shape down the road.