Comerica Bank’s Michigan Index extends gains

DETROIT — Comerica Bank’s Michigan Economic Activity Index increased in 0.6 points in May to a level of 119.4.

The index is comprised of nine variables: nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, housing prices, industrial electricity sales, auto assemblies, total trade, hotel occupancy, and sales tax revenue. All data are seasonally adjusted, converted to constant dollar values, and expressed as a three-month moving average.

During May, six out of the nine variables were positive — unemployment insurance claims, housing starts, housing prices, industrial electric demand, hotel occupancy, and sales tax revenue. Two others — auto and light truck production, and total state trade — were negative. The employment index was unchanged.

Bank officials said strong job growth and elevated consumer confidence have supported Michigan’s auto industry this year. However, the Trump administration’s tariff battles could cut into automaker profitability through steel and aluminum import tariffs, and higher gasoline prices could cut auto sales. Higher interest rates are also likely to dent auto sales and housing activity.

Comerica Bank officials noted that U.S. Trade Representative Robert Lighthizer said at the end of July that it was possible that NAFTA partners could reach a tentative agreement in August. That would allow outgoing Mexican President Enrique Pena Nieto to sign an agreement before he leaves office in December. They said the end of NAFTA-related uncertainty will be a positive for Michigan businesses, but it may not remove other trade-related uncertainty.

May’s reading was 21 points, or 22 percent, above the index cyclical low of 97.9, reached during the last recession in 2007-09. The index averaged 118.2 for 2017 and 117.2 for 2016.

To subscribe to Comerica economic publications or for questions, email ComericaEcon@comerica.com. Archives are available at http://www.comerica.com/insights.

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