August 2019 Arizona Economic Outlook

August 7, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona Maintains Momentum in Early 2019

    The Arizona economy grew at a solid pace in the first half of 2019. Real gross domestic product for the state is expected to post two consecutive quarters of near 4 percent growth. Arizona added 37,000 jobs so far in 2019, which is about the same amount of jobs created in the first six months of 2018. The state’s tourism industry is seeing more positive momentum as national parks visits and airport passenger traffic improved heading into early summer. Construction has been a key sector for the Arizona economy this year. ARMLS reported that home sales in the Phoenix metropolitan area were up 2.6 percent year-over-year in June. The supply of homes for sale was at a very low 2.1 months’ worth. Low housing inventories helped to bolster area home prices. Phoenix home prices were up 5.7 percent year-over-year in May, according to Core Logic Case-Shiller. Low inventories and solid home price appreciation are a positive indicator for construction activity. We expect Arizona to add roughly 33,500 new single-family units this year, slightly above the pace seen in 2018. The recent escalation of the U.S./China trade war amplifies downside economic risk for the state. Arizona businesses with global supply chains and global customers are facing heightened uncertainty. Also, an overall U.S. economic slowdown due to a decline in business and consumer confidence would likely spill over into Arizona. The manufacture of durable goods in Arizona accounts for around 8 percent of state GDP. Growth in Arizona’s durable goods manufacturing industries moderated from 10 percent year-over-year growth in 2018Q1 to 2.6 percent in 2019Q1.

For a PDF version of this publication, click here: August 2019 Arizona Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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August 2019 Florida Economic Outlook

August 7, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Florida Economic Outlook Remains Positive

    The Florida economy continued to expand at a solid pace in the first half of 2019. Job growth rebounded in the second quarter, helping to allay concerns about a slowdown in the pace of hiring in Florida in Q1. We still expect job growth to moderate further in 2019, but at a much more gradual rate than what we saw at the beginning of the year. A tight labor market is limiting the ability of some Florida businesses to expand. Florida real gross domestic product is still on track to increase by near 3 percent this year. The state continues to see positive migration flows which increase demand for goods and services, including housing. Anecdotes support the idea that restrictions on state and local tax deductions from the Tax Cuts and Jobs Act of 2017 (which went into effect in early 2018) are leading to an exodus of property owners from high tax states, like New York and New Jersey, into Florida. However, we will not know if this trend is significantly different than past migration patterns until we see it in the data. We will get the 2018 one-year net-migration estimate in November. So far, the housing data available does not show an upside breakout in Florida housing activity this year. According to Florida Realtors, single-family home sales were up 2.1 percent and townhouse and condo sales were down 4.0 percent year-to-date in June compared to the same time period last year. Lower mortgage rates will provide additional support to Florida housing activity in the second half of the year. Domestic travel into Florida continues to see positive year-over-year gains, supporting the state’s vital tourism industry. Universal recently announced that it plans to open a new theme park in Central Florida. The exact timeframe for the project remains unclear.

For a PDF version of this publication, click here: August 2019 Florida Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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August 2019 California Economic Outlook

August 7, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

California Economy Okay in Q2, Still Faces Headwinds in H2

    The California economy continued to expand at a moderate pace in the second quarter, boosted by stronger than expected job growth. The state added 116,400 jobs in Q2, making it the strongest quarter for job growth since 2017Q4. Nearly one in four jobs created in California in Q2 were in the construction industry. This rise in construction hiring may only be temporary as California housing data has been soft in recent months. According to the California Association of Realtors, existing single-family home sales were down 5.1 percent in the 12 months ending in June. Declines in existing home sales over the past year were seen across all of the state’s major regions. Weaker sales have led to a rise in housing inventory in recent months. Rising inventories, in-turn, have put downward pressure on area home prices. According to Core Logic Case-Shiller, year-over-year home prices were up 1.9 percent in L.A., 1.3 percent in San Diego and just 1.0 percent in San Francisco in May. Lower home prices and declining mortgage rates will support housing activity this year. Yet, we are already late into the economic cycle and housing demand is mostly spent out. Therefore, we expect limited upside potential in California housing activity going forward. The other risk factor for our California economic outlook is the uncertainty surrounding the escalation in international trade disputes. The price-adjusted value of California international trade (imports plus exports) in May remained 8.4 percent below its February 2018 high. The U.S. announced a new round of tariffs on an additional $300 billion worth of Chinese imports which will take place on September 1.

For a PDF version of this publication, click here: August 2019 California Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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August 2019 Texas Economic Outlook

August 7, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Texas Driven by DFW

    The Texas economy is having a strong year in 2019. Most of the state’s major metropolitan areas are showing employment growth well above the national average. Texas was prominent in the June release of metropolitan area employment and unemployment data. According to the Bureau of Labor Statistics, the oil-rich Midland metro area tied for the second lowest unemployment rate in the country at 2.1 percent (nonseasonally adjusted). Of the 51 metro areas with a 2010 population greater than 1 million, Austin shared the honor of having the lowest unemployment rate, at 2.7 percent. The Dallas-Fort Worth (DFW) metro area had the second largest net job gain over the year ending in June, at 120,000, not far behind significantly larger New York City. Among the 51 largest metro areas, DFW had the third highest percent gain in employment over the year, at 3.2 percent. Within the DFW metro area, the eastern half, the Dallas-Plano-Irving metropolitan division, gained 97,000 jobs over the year ending in June, a 3.7 percent year-over-year increase. The Houston metro area was just behind DFW, posting a strong 2.9 percent increase in jobs over the last year. The North Texas area remains a very attractive location for companies seeking to establish a new national headquarters. We expect the red hot North Texas economy to cool a few degrees next year. A cooler national economy will induce more defensive behavior at the board room level, and likely slow the pace of corporate relocations to North Texas. We expect the 2020 Census to show a significant population gain for Texas. This will fuel organic growth for years to come.

For a PDF version of this publication, click here: August 2019 Texas Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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August 2019 Michigan Economic Outlook

August 7, 2019 by Robert A. Dye, Ph.D., Daniel Sanabria

Cooler Outlook for Michigan

    The Trump Administration’s recent threat to increase import tariffs on China signals a deteriorating relationship between the two largest global economies. This brings to mind an African proverb, “When elephants fight it is the grass that loses.” We saw an immediate threat of retaliation by China, along with a small dip in the exchange value of the Chinese currency against the dollar. The renminbi broke through the 7 barrier and U.S. and global stocks sold off with the news. It is our view that the U.S./China Trade War will likely not be quickly resolved. The situation will continue to require adroit planning for companies with global customers and global supply chains. Indirectly, the U.S/China Trade War could also weigh on U.S. consumer confidence if we see ongoing financial market volatility. This could turn into a headwind for auto sales. Auto sales ticked down for the second consecutive month in July, to a 17.0 million unit sales rate. This is not a bad sales rate at all, but it is clearly below the 18.4 million unit peak from September 2017. Contract negotiations between the United Auto Workers and General Motors began in July. GM’s second quarter profits increased by 1.6 percent, driven by strong SUV and truck sales. GM is also restructuring, idling four plants this year, cutting 4,000 white collar jobs and putting nearly 4,000 factory jobs in question. Trade tensions and late-cycle dynamics for the auto industry are two key risk factors for Michigan’s economy this year and next. We expect to see Michigan’s economic growth step down heading into 2020. Job growth will also step down, but it should be sufficient to keep the state’s unemployment rate very low through next year. Net out-migration remains a major risk factor for Michigan’s economy. The results of the 2020 census will be very important for understanding Michigan’s future.

For a PDF version of this publication, click here: August 2019 Michigan Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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