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Economic barometer can aid in financial decisions
2/22/2006
By PATRICK REVERE Business editor
The Holland Sentinel today introduces the Lakeshore Economic Index, a tool that can be used to help readers decide when to sell a home, how much to expand a business, how to invest or simply have a greater knowledge of the lakeshore's business climate.
"What's being offered is something that's going to be very specific to our area," said Jon Steiner, Holland city president for Mercantile Bank. "It seems a comprehensive and reliable snapshot of the economy, saving people the time involved in traveling from source to source and building what often becomes more anecdotal evidence of economic performance."The index will be a regular, ongoing feature of The Sentinel. Four times a year The Sentinel will publish the latest index number, which represents the strength of the local economy. Additionally, expert sources will be used to explain what economic factors forced the movement of the index that quarter.
The index is a numeral that compares the current economy to the economy in January 2004, the base year of the index, that was assigned an index value of 100. If the index is higher than 100, the economy is stronger than it was in January 2004; readings lower than 100 indicate a weaker economy than January 2004.
The categories used to establish and measure the economic index are electricity used in kilowatt hours, water usage, average residential real estate prices, average number of days a home is on the market, new car sales, new home construction, the prime lending rate, unemployment rate and hotel occupancy.
Amy Schuster, a senior economics student at Hope College, gathers the local information largely from local sources. The information then is averaged and weighted by Hope economics professor Victor Claar.
"What you really want to know is how far away from normal the latest changes are in each category," Claar said.
"It gives each of the categories an equal shot of determining the final index," he said. "If one category changes way beyond its common movement, it will weigh in more heavily in that month's index. The more we observe this and measure results, the more reliable the weights and the index will be."
The index was created as a partnership between The Sentinel, the Hope College economics department and Lakeshore Advantage, a regional economic development corporation. The Sentinel, the exclusive media outlet for the Lakeshore Economic Index, will publish a story following each quarter to further detail how and why the economy changed and what it may mean for the coming months.
"We're not economists here at The Sentinel, and this is not something we could do or would want to do on our own," Sentinel Publisher Michael Hengel said. "So we're very happy with the partnerships we have with Lakeshore Advantage and the Hope College economics department."
"Regional, state and national statistics are important because they tell a lot, but they don't tell everything," Hengel said. "If we can produce a meaningful local indicator of the economy's health for our readers we will be offering them a great service," Sentinel Publisher Michael Hengel said.
Tom Postma, vice president of Holland's commercial real estate brokerage Grubb & Ellis/Focus Properties, said he believes the local index will eliminate some of the emotional decision-making that comes with more anecdotal information.
"Whenever people think they see that black cloud out there it's easier to not make a decision than to make a decision on investing or expanding," Postma said. "I think a local economic indicator will be a great thing to have. I think it will give us a better pulse of the local economy if we have some true indicators rather than just relying on the headlines."
Trygve Johnson, dean of the Dimnent Memorial Chapel at Hope College, said he feels the index will offer meaning even to those who operate outside traditional business and investment circles.
"Indirectly, in terms of understanding the economy from which many of our students come, it would be of interest to me to see how changes in the index reflect changes in student performances at the college. It also would be interesting to see how changes in the index compare with changes in tuition," Johnson said.
"I think it will make me a lot more sensitive to the economy around me, which is very important to the community," he said. "I value community because I think what happens to one of us happens to all of us."
Contact Patrick Revere at patrick.revere@hollandsentinel.com or (616) 546-4280.
Story courtesy of the Holland Sentinel
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