Comerica Bank Michigan Economic Index falls

DETROIT—Comerica Bank’s Michigan Economic Activity Index decreased by 0.7 percent in January to a level of 117.2.

The Michigan Economic Activity Index consists of nine variables: 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 and converted to constant dollar values. Index levels are expressed in terms of three-month moving averages.

Bank officials noted the index has now fallen for three straight months and six out of the past eight months. Four of the nine index components were positive, however: nonfarm payrolls, house prices, industrial electricity demand, and state sales tax revenues. Negatives for January were unemployment insurance claims, housing starts, light vehicle production, total state trade, and hotel occupancy.

Bank officials said they expect “moderate to weak” gross state product growth for 2018 and only weak growth in 2019. They said the state’s auto industry is “enduring creative destruction,” with “older auto plants for less popular gasoline-powered products are closing, while new facilities are planned for next-generation electric vehicles. We expect the churn in the auto industry to result in a net reduction in (the number of) workers required per vehicle assembled… This will likely have negative consequences for Michigan’s labor market even as the auto industry remains healthy overall.” They also predicted Michigan will feel the effects of a cooling United States and global economy.

January’s reading is 19 points, or 20 percent, above the index cyclical low of 97.9, reached at the bottom of the last recession in 2007-09. The index averaged 118.4 points for all of 2018, 0.1 points above the index average for 2017. December’s index reading was 118.0.

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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