Comerica Bank's California Index Drives Lower

Rhea-AI Summary

Comerica Bank's California Economic Activity Index fell to 96.8 in May 2020, hitting a historical low. The index declined 11.1% from April, reflecting significant economic disruptions due to the coronavirus pandemic. Seven of the eight components, including nonfarm payrolls and industrial electricity demand, declined. The index is now 23% below its February peak. Despite a boost in housing sales in June, concerns linger due to rising COVID-19 cases, which may jeopardize the anticipated economic recovery for the second half of 2020.

Positive

• The house price index remained a positive component amidst overall declines.
• Existing single-family home sales in California surged 42.4% in June.

Negative

• California's Economic Activity Index reached a historical low of 96.8.
• The index declined 11.1% in May, following a 10.8% drop in April.
• Seven out of eight index components, including nonfarm payrolls and hotel occupancy, declined.
• California's real GDP declined at a 4.7% annualized rate in Q1.
• The index is 23% below its February peak, indicating significant economic contraction.

DALLAS, July 29, 2020 /PRNewswire/ -- Comerica Bank's California Economic Activity Index declined in May to a level of 96.8. May's reading marks a new historical low for the index. The index averaged 124.4 points in 2019, 0.5 points above the average for all of 2018. April's reading was revised to 108.9.

Our state economic activity indexes for May show the historic decline in economic activity this spring due to the coronavirus pandemic. The California Economic Activity Index declined 11.1 percent in May, after falling 10.8 percent in April. In May, seven out of eight components moved lower. The negative components were nonfarm payrolls, unemployment insurance claims (inverted), housing starts, industrial electricity demand, state total trade, the Dow Jones Technology Index and hotel occupancy. Similar to April, the sole positive component for May was the house price index. The Bureau of Economic Analysis confirmed that the California economy dipped into recession with state real GDP declining at a 4.7 percent annualized rate in Q1. As of May, the California Index was 23 percent below its February peak, consistent with an even steeper decline in the state's real GDP in Q2. We expect our California Index to improve over the coming months reflecting the limited re-opening of the California economy in early summer. California housing markets in particular improved in June. According to the California Association of Realtors, existing single-family home sales jumped 42.4 percent in June, following three consecutive monthly declines. However, it is important to note that we are entering a new phase of economic uncertainty. The recent surge in COVID-19 cases in California puts the expected economic recovery in 2020H2 at risk due to the return of stricter social mitigation policies.

The California Economic Activity Index consists of eight variables, as follows: nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house price index, industrial electricity sales, total trade, technology stock index and hotel occupancy. 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, Texas, and strategically aligned by three business segments: The Commercial Bank, The Retail Bank, and Wealth Management. Comerica focuses on relationships, and helping people and businesses be successful. 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 at June 30, 2020 and celebrated its 170th anniversary in August 2019.  

To subscribe to our publications or for questions, contact us at ComericaEcon@comerica.com. Archives are available at http://www.comerica.com/insights. Follow us on Twitter: @Comerica_Econ.

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SOURCE Comerica Bank

FAQ

What was the California Economic Activity Index for May 2020?

The California Economic Activity Index dropped to 96.8 in May 2020.

How much did the California Economic Activity Index decline in May 2020?

The index declined 11.1% in May 2020 after a 10.8% decline in April.

What economic factors contributed to the decline in the California Index?

Factors included falling nonfarm payrolls, rising unemployment claims, and decreased industrial electricity demand.

How much did California's real GDP decline in Q1 2020?

California's real GDP declined at a 4.7% annualized rate in Q1 2020.

What are the expectations for the California economy in the second half of 2020?

There are concerns about the expected economic recovery due to rising COVID-19 cases.