Comerica Bank's Michigan Index Improves

Rhea-AI Summary

Comerica Bank's Michigan Economic Activity Index rose to 109.7 in January 2021, marking a 26% increase from its low in June 2020. This index reflects ongoing economic recovery despite challenges from COVID-19. Four of the nine components, including housing starts and light vehicle production, were positive, while payroll employment and state sales tax revenue were among the negatives. The report anticipates mixed results for February and March due to potential declines in consumer spending and supply chain issues. However, a new $1.9 trillion fiscal stimulus may boost consumer confidence.

Positive

• Michigan Economic Activity Index increased to 109.7 in January, 26% above June 2020 low.
• Four out of nine index components improved, including housing starts and light vehicle production.
• Significant improvement in U.S. consumer confidence data for March.

Negative

• Payroll employment and industrial electricity demand decreased.
• Supply chain issues and global chip shortages may impact vehicle production.
• Consumer spending may decline in February after fiscal stimulus-related spikes in January.

DALLAS, March 31, 2021 /PRNewswire/ -- Comerica Bank's Michigan Economic Activity Index increased in January to a level of 109.7. January's reading was 26 percent higher than the historical low reached in June 2020. The index averaged 105.0 points for all of 2020, 12.8 points below the index average for 2019. December's index reading was revised to 108.8.

Our Michigan economic activity index increased for the seventh consecutive month in January, showing ongoing gains to the state economy despite the dangerous surge in coronavirus cases last fall and winter and state efforts to stem the outbreak. January index components showed mixed results. Four out of nine index components were positive, including unemployment insurance claims (inverted), housing starts, house prices and light vehicle production. The negatives for the month were payroll employment, industrial electricity demand, total state trade, hotel occupancy and state sales tax revenue. We expect February and March data for Michigan to continue to be mixed. There was likely some letdown in consumer spending in February after fiscal-stimulus-induced gains in January. Also, a global computer chip shortage and other supply chain constraints have caused automakers to throttle back motor vehicle production in Michigan and elsewhere. Supply chain constraints for the manufacturing sector could weigh on production into summer. On the plus side is the new $1.9 trillion fiscal stimulus package that will be supportive of consumer spending in March and April. Also, U.S. consumer confidence data for March improved significantly. We expect increased vaccinations to support further gains in consumer confidence this spring, adding to demand for vehicles. However, low inventories at car dealerships will crimp sales until production can ramp up.

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 $88 billion as of Dec. 31, 2020.

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SOURCE Comerica Bank

FAQ

What does Comerica's Michigan Economic Activity Index indicate for January 2021?

The Michigan Economic Activity Index increased to 109.7, showing economic recovery.

How does the current Michigan Economic Activity Index compare to previous months?

The index rose 26% from its historical low in June 2020 and is a positive trend.

What components contributed positively to the Michigan Economic Activity Index?

Positive contributors included housing starts, house prices, and light vehicle production.

What are some of the negative components affecting Michigan's economy as per the January report?

Negative factors include payroll employment drops, industrial electricity demand, and lower state sales tax revenue.

How might the $1.9 trillion fiscal stimulus package impact consumer spending in Michigan?

It is expected to support increased consumer spending in March and April.