Comerica Bank’s Michigan Economic Activity Index increased in May to a level of 119.4. May’s reading is 21 points, or 22 percent, above the index cyclical low of 97.9. The index averaged 118.2 points for all of 2017, one point above the index average for 2016. April’s index reading was revised to 118.8.
Comerica Bank’s Michigan Economic Activity Index increased in May for the third consecutive month. Six out of nine sub-indexes were positive in May. The were unemployment insurance claims (inverted), housing starts, house prices, industrial electricity demand, hotel occupancy and sales tax revenues. The auto and light truck production sub-index eased in May, as did the sub-index for total state trade. The non-farm employment sub-index was unchanged in May. Strong U.S. job growth and elevated consumer confidence have been supportive of Michigan’s auto industry this year. However, there are some headwinds. Steel and aluminum import tariffs have cut into automaker profitability and are putting pressure on auto prices. Higher gasoline prices are increasing the cost of operating the light trucks and SUVS that roll off of Michigan assembly lines. Higher interest rates are also boosting the cost of financing vehicles. Stalled residential construction numbers this year may be weighing on demand for new pickup trucks. U.S. Trade Representative Robert Lighthizer said at the end of July that it was possible that NAFTA partners could reach a tentative agreement in August. That would allow outgoing Mexican President Enrique Pena Nieto to sign an agreement before he leaves office in December. We expect that the end of NAFTA-related uncertainty will be a positive for Michigan businesses, however, it may not remove other trade-related uncertainty.
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