Comerica Bank's Michigan Index Bottoming
Comerica Bank's Michigan Economic Activity Index fell to a historic low of 86.6 in June 2020, down from 90.3 in May. The year-to-date average is 117.7, indicative of economic decline. The drop reflects ongoing challenges such as high unemployment rates and reduced demand from the pandemic. Four sub-indexes showed positive results, including housing starts and vehicle production, while five negatively impacted components included nonfarm employment and trade revenues. There are cautions against assuming a quick recovery as COVID-19 cases increase.
- Housing starts and vehicle production showed unexpected strength.
- Low interest rates are supporting housing markets.
- Michigan Economic Activity Index reached a record low of 86.6.
- High unemployment is expected to persist, affecting economic activity.
- Five sub-indexes indicated negative trends, including nonfarm employment and sales tax revenues.
DALLAS, Aug. 28, 2020 /PRNewswire/ -- Comerica Bank's Michigan Economic Activity Index declined in June to a level of 86.6. June's reading is a new historical low for the index. The index averaged 117.7 points for all of 2019, 0.9 points below the index average for 2018. May's index reading was 90.3.
Our state economic activity indexes for June showed some further deterioration in state economies. This is partially a result of smoothing techniques that we use to process the data. We expect Michigan and other states to show positive overall numbers in July and August reflecting states' relaxation of their social mitigation policies. Even as we see stronger Q3 data for the U.S. and most states, we caution against assuming that this is a V-shaped economic recovery. After relaxing some social mitigation policies in late spring, many states experienced an uptick in COVID-19 cases by mid-summer requiring them to tighten policies again. Now with the school year starting, we remain cautious about the potential for increased COVID-19 cases this fall. Also, the demand destruction from the spring shutdowns is still reverberating through the economy. We expect most states, including Michigan, to face a lingering high unemployment rate well into next year, and that will be a drag on overall economic activity. In June, four of the nine sub-indexes for Michigan were positive. They were housing starts, house prices, light vehicle production and hotel occupancy. The five negative sub-indexes were nonfarm employment, unemployment insurance claims (inverted), industrial electricity demand, total state trade and state sales tax revenues. Despite the huge amount of economic churn that we are seeing, housing markets and auto sales have been stronger than expected, helped by low interest rates. However, shaky consumer confidence is a risk to both consumer sectors.
The Michigan Economic Activity Index consists of nine variables, as follows: 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, 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
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