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We expect the Michigan economy to continue to grow through 2019, but we also expect the pace of growth to slow significantly as the year progresses.

February 2019 Michigan Economic Outlook

February 11, 2019
By Robert A. Dye, Ph.D., Daniel Sanabria

Headwinds Ahead for Michigan’s Auto Sector

We expect the Michigan economy to continue to grow through 2019, but we also expect the pace of growth to slow significantly as the year progresses. Michigan’s important auto industry and related durable goods manufacturers are facing increasing headwinds. The global economy is decelerating in early 2019. Economic data from China has been weak and is consistent with cooler GDP growth in 2019. China is an important market for GM, which has reported weaker profits due to softer sales in China. GM has initiated its North American restructuring plan and will eliminate about 4,000 jobs and close 5 plants this year. Europe is also showing signs of cooler economic growth. Ford has announced a restructuring plan for their European division. A downshift in the global economy will be a factor in cooler U.S. economic growth in 2019, and by extension, weaker U.S. vehicle sales. Also, accelerated depreciation due to tax reform may have front-loaded commercial vehicle demand in 2018, thereby reducing demand in 2019. We expect to see U.S. light vehicle sales of about 16.6 million units in 2019, down from 17.2 million units in 2018. Dealer inventory was up by 3 percent at the end of 2018, compared with a year earlier. Inventory expansion could turn into a weight on production if sales drop off this year. While finances are in good shape for most U.S. households, consumer confidence fell in January as the longest federal government shutdown in history dragged on. Good news could come in the form of a trade deal with China that would at least remove the threat of increasing tariffs, and possibly lead to a reduction in trade tariffs. With cooler economic growth and higher mortgage rates, we expect Michigan’s housing market to remain subdued in 2019.

For a PDF version of this report, click here: February 2019 Michigan Economic Outlook

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