Comerica Bank’s California Economic Activity Index increased in October to a level of 125.0. October’s reading was 27 points, or 28 percent, above the index cyclical low of 97.8. The index averaged 124.0 points in 2018, 2.8 points above the average for all of 2017. September’s reading was revised to 124.6.
Comerica Bank’s California Economic Activity Index improved again in October, its third consecutive monthly gain. Helping to drive the gains in October were nonfarm employment, unemployment insurance claims (inverted), housing starts, house prices, the Dow Jones Technology Index and hotel occupancy. The two negative components in October were industrial electricity demand and total state trade. The California Index was range bound for most of 2018 and the first three quarters of 2019. The index appears to have broken out of this range in the last quarter of 2019, consistent with a California economy growing at a moderate pace. California’s housing sector improved heading into Q4 of last year, supported by steady job growth and lower mortgage rates. The Federal Reserve’s 75 basis points worth of cuts on short-term borrowing helped put downward pressure on mortgages last year. However, the benefit to California’s housing sector may only be marginal in 2020 as the Fed expects to keep policy rates unchanged this year. Trade activity remains a headwind for the state’s economy. State total trade has now declined 15 out of the last 20 months. The passage of USMCA in the House of Representatives is a positive development for California trade. However, the timeline for when the bill will be passed by the Senate remains unknown. The signing of a Phase 1 trade deal between the U.S. and China should also be positive for California trade.
The California Economic Activity Index consists of eight variables, as follows: nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house price index, industrial electricity sales, total trade, technology stock index and hotel occupancy. 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 Bank, with locations in the key California markets of San Francisco and the East Bay, San Jose, Los Angeles, Orange County, San Diego, Fresno, Sacramento, Santa Cruz/Monterey, and the Inland Empire, is a subsidiary of Comerica Incorporated (NYSE: CMA). Comerica is a financial services company headquartered in Dallas, Texas, and strategically aligned into three major business segments: the Business Bank, the Retail Bank, and Wealth Management. Comerica focuses on relationships and helping businesses and people be successful.