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Comerica Bank’s California Index Ticks Up

January 3, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

Comerica Bank’s California Economic Activity Index grew by 0.1 percent in October to 121.3. October’s reading is 24 points, or 24 percent, above the index cyclical low of 97.8. The index averaged 118.6 points in 2016, two and three-tenths points above the average for all of 2015. September’s index reading was revised to 121.1.

Comerica Bank’s California Economic Activity Index in-creased again in October, after pulling out of a late summer stall in September. The index has increased in five out of the last seven months. The trends in California look generally positive heading into 2018, however the October 2017 reading of 121.3 is only 1.7 percent above the level for October 2016. Payroll employment, house prices, the Dow Jones Tech Stock Index and hotel occupancy were positives in October. Unemployment insurance claims (inverted), housing starts and total state trade were negatives. Industrial electricity consumption was neutral in October. The state enduredrecord-setting wildfires in 2017 and is exposed to key Trump Administration policy changes, including tax reform and trade agreement renegotiations. The state’s important residential construction sector will face some challenges in 2018. Even before the fall wildfires, California’s construction industry was facing a labor shortage. Trade groups report ongoing difficulties in finding workers. Also, we expect mortgage interest rates to gradually increase in 2018, reducing housing affordability. Tax reform will have both positive and negative implications for housing in California. Limits on the mortgage interestdeduction and on state and local tax deductions will be headwinds. However, the generally business friendly tax changes and expected reduction to personal taxes will be positives.

For a PDF version of this report click here: CA_Index_1217.

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