Comerica Michigan Index ticks up

DETROIT—Comerica Bank’s Michigan Economic Activity Index increased in September to a level of 105.6.

The index is comprised 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, converted to constant-dollar values, and expressed as a three-month moving average.

Comerica officials said the index rose for the third straight month after bottoming out in late spring. But they said that while the rate of increase was still strong, at 2.5 percent for the month, the three-month trend points toward smaller monthly gains ahead.

In September, eight out of nine index components were positive: nonfarm employment, unemployment insurance claims, house prices, industrial electricity demand, light vehicle production, total state trade, hotel occupancy, and sales tax revenue. The only declining element in September was housing starts.

Tougher times lie ahead, however. Due to increasing coronavirus infections this fall, Michigan has again tightened its social mitigation policies and this will drag on state economic performance in the fourth quarter. The most recent orders are effective from Nov. 18 through Dec. 9, closing schools, ending indoor dining at bars and restaurants and mandating working from home when possible. The economists also noted that Gov. Gretchen Whitmer has asked the state legislature to approve a $100 million relief plan that would provide support to businesses and households. She has also asked for an extension of unemployment insurance benefits.

Michigan’s auto industry may also see reduced demand for new automobiles at year-end. The surge in coronavirus cases plus election uncertainty weighed on consumer confidence in November. Comerica economists said they expect strong demand for new automobiles once confidence recovers as vaccines are distributed.

September’s reading was 22 percent higher than the cyclical low of 86.9, reached at the bottom of the coronavirus recession in late spring.

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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