Industrial Spending in Michigan on the Decline in 2006

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Researched by Industrialinfo.com (Industrial Info Resources; Houston, Texas). The state of Michigan has seen it all before; the "Last One Out Turn Off the Lights" bumper stickers, a major lull in spending across the board and an automotive industry that is struggling. Unfortunately, 2006 is shaping up to be another one of those types of years. Currently, spending for 2006 in the state is backpedaling with just over $2 billion worth of industrial projects anticipated to begin construction during the year.

The traditional big spenders in the state, Power and Industrial Manufacturing, which includes automotive, are not spending at typical levels in 2006. Power Industry spending is down by over $1.3 billion and the Industrial Manufacturing Industry spending is down by just over $1.1 billion; both significant differences between 2005 and 2006 spending.

Click on the image at right to view the 2006 project spending chart

These spending decreases are due to multiple factors that are affecting the entire state. In the Power Industry, the majority of the environmental-related issues that other states are dealing with during 2006 have already been addressed in Michigan. In addition, the experiment with natural gas-fired projects has almost died out with the natural gas prices on the rise. Coal-fired capacity increases are not expected to take shape until 2007 or beyond, further complicating the lack of spending for the state in the industry.

Within the Industrial Manufacturing industry, the automotive industry is in severe distress with the recent announcements of closures and major layoffs by both General Motors and Ford. As a result, the majority of the tier suppliers who support the Michigan automotive plants are delaying, or outright canceling plans, for additional expenditures while they wait and see how the closures shake out for the industry.

Gap measurement shows us that project fallout has been pretty significant in the state of Michigan across all industries. In 2005, project fallout reached the 40% level. Already in 2006, project fallout has surpassed 2005’s number and is approaching 50% for the year. This is a pretty significant increase over just a year ago and is reflective of the turmoil within the states industries. This number may well rise into the 60-70% range as the year progresses.

Click on the image at right to view the 2005 vs. 2006 Gap Measurement Analysis Graph

As the year moves forward, we here at Industrialinfo.com will be keeping a close eye on the spending in Michigan, both by industry and the state as a whole. Is 2006 just a single down year in a cyclical spending tradition or is this the beginning of another spending slump along the lines of what the state experienced during the late 70’s and early 80’s? The answers to these questions will evolve as the year evolves, and hopefully, the woes of 2006 are just a hiccup in the state’s spending in the beginning of the new millennium.

Industrial Info Resources (IIR) is a Marketing Information Service company that has been doing business for over 23 years. IIR is respected as the leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.