Comerica Bank's California Index Lower in August

Rhea-AI Summary

The Comerica California Economic Activity Index decreased at a 2.8% annualized rate in the three months ending August, despite being up 6.2% year-over-year. This decline marks a slowdown from prior robust growth. Although employment and industrial activity showed improvement, house prices fell for the third consecutive month amid rising interest rates and inflation. The report highlights challenges ahead, including a weakening housing sector and slowing consumer spending, particularly affecting California's tech sector, a key industry for the state's economy.

Positive

• California experienced robust employment gains.
• Increased electricity consumption by the industrial sector indicates a rebound in activity.
• Housing starts in California showed positive movement.

Negative

• House prices declined for three consecutive months.
• Weak residential investment is expected to continue.
• Travel industry indicators, such as air passenger traffic and hotel occupancy, lost momentum.
• California's economy faces headwinds from a weakening housing sector, rising interest rates, high inflation, and slowing consumer spending.
• The slowdown in the tech sector is an additional negative factor.

DALLAS, Nov. 9, 2022 /PRNewswire/ -- The Comerica California Economic Activity Index declined at a 2.8% annualized rate in the three months through August. The Index has slowed from the robust increases in the first half of the year. The index was still up 6.2% from a year-ago in August.

Three of the nine components that constitute the Index rose in August. California continues to enjoy strong employment gains. Electricity consumption by California's industrial sector rebounded in the month, indicating a pickup in industrial activity. So did housing starts in the Golden State.

However, house prices fell in California for a third consecutive month in August. Housing affordability is a longstanding problem in California and has gotten worse as first home prices and then interest rates surged post-pandemic. Declines in house prices and weak residential investment are likely going forward. In addition, air passenger traffic and hotel occupancies show the travel industry lost momentum in August, after notable gains in the second quarter.

California's economy is expected to continue to lose momentum in the coming months, as it faces a number of headwinds, including a weakening housing sector, rising interest rates, high inflation, and slowing consumer spending. The slowdown in the tech sector, a key industry of the Californian economy, is an additional negative for the Golden State's economy.

The Comerica California Economic Activity Index is a monthly composite indicator of state economic activity. The Index provides a wholistic advance view of the state of California's economy, using economic data that are available about one quarter earlier than real GDP is released. The index is comprised of nine components: Nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house prices, industrial electricity sales, foreign trade, enplanements, hotel occupancy, and state revenues. All data are seasonally adjusted with nominal values converted to constant dollar values as appropriate. To filter out month-to-month volatility in the index components, the index is calculated from the three-month moving averages of its components. Values for a minority of components are projected from the prior months' release due to the timing of data releases.

Comerica Bank is a subsidiary of Comerica Incorporated (NYSE: CMA), 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 $84.1 billion as of Sept. 30, 2022.

To subscribe to our publications or for questions, contact us at ComericaEcon@comerica.com. Archives are available at www.comerica.com/insights.

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SOURCE Comerica Bank

FAQ

What was the Comerica California Economic Activity Index change for August 2022?

The Index declined at a 2.8% annualized rate for the three months ending August 2022.

What were the key indicators affecting California's economy in August 2022?

Key indicators included declining house prices, weak residential investment, and slowing consumer spending.

How did California's employment figures perform in August 2022?

California continued to experience strong employment gains as of August 2022.

What challenges does California's economy face following the August 2022 report?

Challenges include a weakening housing sector, rising interest rates, high inflation, and a slowdown in the tech sector.