A barometer of Michigan’s economic activity shows that the state is slowly rebounding.
Comerica Bank’s Michigan Economic Activity Index, published this month, increased in July to a level of 95.1. July’s reading was eight points, or 10% higher than the cyclical low. The index averaged 117.7 points for all of 2019, 0.9 points below the index average for 2018.
June’s index reading was revised to 86.7.
“Our state economic activity indexes all showed a rebound in economic activity in July,” said Daniel Sanabria, who compiled data for the report. “The rebound is dampened somewhat because of the smoothing process that we use to reduce the volatility inherent in some regional economic data. We expect to see an ongoing strong rebound in the August state economic activity indexes.”
In July, eight out of nine sub-indexes were positive for Michigan. This was the strongest performance since last February, when all nine components showed gains.
“The positive contributors for July were nonfarm payrolls, unemployment insurance claims (inverted), housing starts, industrial electricity demand, light vehicle production, total state trade, hotel occupancy and state sales tax revenue,” Sanabria said in the report.
Only the house price sub-index was negative for the month. Michigan, along with many other states, saw an uptick in coronavirus cases in September. This represents “a significant downside risk factor” for the state economy this fall and winter, according to Sanabria.
Increasing cases in other states also represents a risk factor for Michigan to the extent that they are a weight on auto sales. Light vehicle sales were stable in July and August, near a 15-million-unit rate, well below the peak 18.7-million-unit sales rate from August 2019.
California announced Sept. 23 it will ban sales of new gasoline powered cars in 2035. “This will add to the push toward electrification of the industry, which will result in a significant reduction in the amount of labor needed per vehicle assembly,” Comerica said.
The Michigan Economic Activity Index consists of nine variables: nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house price index, industrial electricity sales, auto assemblies, total trade, hotel occupancy and sales tax revenue. All data are seasonally adjusted. Nominal values have been converted to constant dollar values. Index levels are expressed in terms of three-month moving averages.
Comerica Incorporated (NYSE: CMA) is a financial services company headquartered in Dallas, with three business segments: The Commercial Bank, The Retail Bank and Wealth Management. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. Comerica reported total assets of $84 billion as of June 30, 2020 and celebrated its 170th anniversary in August 2019.