Comerica Bank's California Index Falls

Rhea-AI Summary

Comerica Bank's California Economic Activity Index dropped to 109.1 in April, reflecting a 10.7% decline due to the COVID-19 pandemic. This index is 12 points above its cyclical low of 97.8, and was significantly above the 124.4 average for 2019. Key economic components such as nonfarm payrolls and housing starts fell, despite a rise in the house price index in some regions. The state has begun reopening, showing signs of recovery with positive job growth in May. However, new COVID-19 cases threaten further economic stability and recovery.

Positive

• The California Economic Activity Index, while down, remained above its cyclical low, indicating potential resilience.
• Job growth turned positive in May, showing signs of recovery.
• The house price index showed mixed results, with increases in Los Angeles and San Diego.

Negative

• The index fell by 10.7% in April, indicating a steep recession.
• Seven out of eight components of the index showed decline.
• Initial unemployment insurance claims remained high at 240,000 per week, far above pre-COVID levels.
• A surge in COVID-19 cases could lead to stricter mitigation policies, threatening economic recovery.

DALLAS, July 1, 2020 /PRNewswire/ -- Comerica Bank's California Economic Activity Index declined in April to a level of 109.1. April's reading was 12 points, or 11 percent, above the index cyclical low of 97.8. The index averaged 124.4 points in 2019, 0.5 points above the average for all of 2018. March's reading was to 122.2.

Our state economic activity indexes for April are showing the full impact of the coronavirus pandemic on state economies. California is facing a steep economic recession this spring. Our California Economic Activity Index fell 10.7 percent in April, after falling 3.4 percent in March. In April, 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. The house price index was the only positive component, yet even this metric saw mixed results across the state's major metropolitan areas. House prices rose in the Los Angeles and San Diego metropolitan areas, while San Francisco house prices declined in April. The economic data is expected to improve in May and June as the state began reopening parts of its economy. California job growth turned positive in May after ticking lower in April and March. Weekly state initial unemployment insurance claims, which are a proxy measurement for layoffs, are beginning to stabilize at around 240,000 per week through early June. However, this is well above the pre-COVID-19 average of 40,000 new claims per week. The state has also faced a surge in new COVID-19 cases in some major metropolitan areas in late June. This poses a serious downside risk to the state economy, especially if the state and local governments push for a return to strict 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 Bank, with locations in the key California markets of San Francisco and the East Bay, San Jose, Los Angeles, Orange County, San Diego, Fresno, Sacramento, Santa Cruz/Monterey, and the Inland Empire, is a subsidiary of Comerica Incorporated (NYSE: CMA). Comerica is a financial services company headquartered in Dallas, Texas, and strategically aligned into three major business segments: The Commercial Bank, The Retail Bank, and Wealth Management. Comerica focuses on relationships and helping businesses and people be successful.

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 April 2020?

The California Economic Activity Index fell to 109.1 in April 2020, down by 10.7%.

What were the main components affecting the California Economic Activity Index?

Nonfarm payrolls, unemployment insurance claims, housing starts, and hotel occupancy negatively impacted the index.

How did job growth perform in California in May 2020?

Job growth became positive in May 2020 after declines in April and March.

What challenges does California face in its economic recovery?

The rise in COVID-19 cases poses risks for the state's economic recovery and may lead to renewed restrictions.

How does the house price index factor into California's economic outlook?

The house price index showed mixed results, with increases in some areas like Los Angeles, indicating a potential positive factor amidst broader declines.