Comerica Bank’s Michigan Index Dips Again

DALLAS, TX (STL.News) Comerica Bank’s Michigan Economic Activity Index declined in October to a level of 117.8.  October’s reading is 20 points, or 20 percent, above the index cyclical low of 97.9.  The index averaged 118.6 points for all of 2018, 0.2 points above the index average for 2017.  September’s index reading was revised to 118.0.

Comerica Bank’s Michigan Economic Activity Index ticked down again in October as the GM/UAW strike impacted key data series.  We expect the Michigan Index to rebound in November, showing the positive impact of the strike’s early-November resolution.  For October, only two out of nine components of the Michigan Index were positive.  They were housing starts and state sales tax revenue.  Residential construction lifted in many areas in late 2019 as home sales improved following the Federal Reserve’s cut of key interest rates through last summer and fall.  The house price sub-index and the hotel occupancy sub-index were both unchanged in October.  The five declining components in the Michigan Index for October were non-farm employment, unemployment insurance claims (inverted), industrial electricity demand, light vehicle production and total state trade.  All five declining components were weighed down by the 6-week-long strike at GM.  Even though striking workers are not eligible for unemployment insurance benefits, the production shutdown at GM backed up their supply chain, resulting in temporary layoffs of non-striking workers. Many of those workers were eligible for unemployment insurance benefits.  The expected ratification of the USMCA trade deal is also good news for Michigan’s manufacturing sector.  As is the expected signing of a Phase 1 trade deal with China.

The Michigan Economic Activity Index consists of nine variables, as follows: non-farm 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.