Pent-up demand for cars could be good for Michigan in recession, economist says

MICHIGAN (WNEM) – A latest report forecasting Michigan’s financial future mentioned it’s attainable the state could be shielded from the brunt of a possible recession, sarcastically, due to the pc chip scarcity.

Non-automotive and constructive industries are going through a tricky surroundings because of rising rates of interest, and the forecast carried out by the College of Michigan hopes it’s the auto trade that protects Michigan’s economic system within the occasion of a recession.

Christopher Douglas, economics professor on the College of Michigan-Flint, mentioned the scarcity of chips has curtailed auto manufacturing, and that has led to an ongoing robust demand for brand spanking new vehicles.

“Individuals who may need wished to purchase a brand new automotive during the last two years maybe weren’t in a position to, so provided that pent-up demand for cars, even when the nationwide economic system slows down, maybe auto gross sales gained’t fall by means of the ground like they did in earlier slowdowns,” Douglas mentioned.

The report mentioned whereas a “recession is extra possible than to not arrive over the subsequent 18 months,” Michigan’s expertise could possibly be totally different this time.

The forecast additionally projected inflation would come down from greater than 8 p.c now to 2.5 p.c by 2024.

“This can be a best-case state of affairs for the economic system as a result of they’re forecasting inflation coming down over the subsequent two years to again the place it was earlier than COVID, which was round 2 p.c,” Douglas mentioned.

UM’s findings additionally made a willpower concerning the labor drive.

“The restoration within the state’s labor drive participation price lags nicely behind the nation’s, posing an necessary problem to Michigan’s labor market,” the forecast reads.

In the meantime, the predictions for job development are anticipated to proceed reasonably.

The UM report additionally predicted the state unemployment price will stay at 4.1 p.c till mid-2023 and attain a cyclical peak of 4.7 p.c by 2024.

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