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Comerica Bank’s Michigan Economic Activity Index fell again in August to a level of 118.1.

Comerica Bank's Michigan Index Drops

October 31, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

Comerica Bank’s Michigan Economic Activity Index fell again in August to a level of 118.1. August’s reading is 20 points, or 21 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. July’s index reading was 118.4.

Comerica Bank’s Michigan Economic Activity Index fell for the third consecutive month in August. This is the first three-month drop for the Michigan Index since early 2015. The August index value of 118.1 is little changed since the end of 2016, telling us that the Michigan economy has lost momentum over the last two years, coincident with the levelling of U.S. auto sales that began in late 2015. In 2018 it looks like the trend in auto sales is down even though they bounced back in September, to a 17.4 million unit rate. A key missing piece for the Michigan economy is momentum in the housing sector. Residential construction activity remains subdued. House prices have advanced in this business cycle, but appear to have stalled out this summer. Only three out of nine index components were positive in August. They were nonfarm employment, auto production and state sales tax revenues. The six declining components were unemployment insurance claims (inverted), housing starts, house prices , industrial electricity sales, total state trade and hotel occupancy. Consumer conditions in the U.S. are good with strong labor markets and high consumer confidence. However, Michigan’s auto sector has some headwinds in the form of higher materials and labor costs and higher interest rates. The resolution of the U.S.-Mexico-Canada Trade Agreement removes some uncertainty for many Michigan businesses. The pact remains to be ratified by each country.

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