Comerica Bank's California Index's Growth Stalled in the Fall

DALLAS, Jan. 22, 2024 /PRNewswire/ -- The Comerica California Economic Activity Index was unchanged for a second consecutive month in the three months through October, and was up 1.6% from a year earlier. Six components of the index rose, while three declined.

Employment rose by 34,500, but the pace of job growth year-to-date has been roughly half of 2022's. Additional signs that the Golden State's job market is cooling include elevated continuing claims for unemployment insurance, holding above 400,000 for the sixth consecutive month, and a 0.7% rise in the unemployment rate since December 2022, to 4.8%. Seasonally-adjusted industrial electricity sales, a proxy for industrial production in the state, took a breather and fell by 1.5% in October after rising strongly in the prior three months. 

Housing starts rose for a second consecutive month in October, but were nonetheless about 7% lower in the first ten months of the year than in the same period of 2022. Led by sharp increases in California's three largest metro areas – Los Angeles, San Francisco, and San Diego – house prices rose for the ninth consecutive month in October. House prices have fully recovered from their decline in 2022 and are up 7.1% from their recent lows in January 2023. Housing supply constraints will continue to exert upward pressure on house prices. Seasonally-adjusted hotel occupancy declined on the month and also on the year, while air passenger traffic declined for the fourth consecutive month, pointing to softer activity in the critical tourism sector. Real state fiscal revenues are down sharply in the current fiscal year from the same period in the previous year, reflecting much lower personal income and corporate tax receipts.

California's real GDP grew robustly in the first three quarters of 2023 following modest 0.7% annual growth in 2022. But Comerica's California Index suggests the Golden State's economy likely lost momentum in the fall amid headwinds to housing, high interest rates, persistent inflation, and slowing consumer spending. On top of these issues weighing on the national economy, the tech slowdown is still an incremental negative for the Golden State.

The Comerica California Economic Activity Index is a monthly composite indicator of state economic activity. The Index provides a wholistic advance view of the state of California's economy, using economic data that are available about one quarter earlier than real GDP is released. The index is comprised of nine components: Nonfarm payroll employment, continuing claims for unemployment insurance, housing starts, house prices, industrial electricity sales, foreign trade, enplanements, hotel occupancy, and state revenues. All data are seasonally adjusted with nominal values converted to constant dollar values as appropriate. To filter out month-to-month volatility in the index components, the index is calculated from the three-month moving averages of its components. Values for a minority of components are projected from the prior months' release due to the timing of data releases.

Comerica Bank, a subsidiary of Comerica Incorporated (NYSE: CMA), is a financial services company headquartered in Dallas, Texas, and strategically aligned by three business segments: The Commercial Bank, The Retail Bank, and Wealth Management. Comerica focuses on building relationships and helping people and businesses be successful, providing more than 400 banking centers across the country with locations in Arizona, California, Florida, Michigan and Texas. Founded 175 years ago in Detroit, Michigan, Comerica continues to expand into new regions, including its Southeast Market, based in North Carolina, and Mountain West Market in Colorado. Comerica has offices in 17 states and services 14 of the 15 largest U.S. metropolitan areas, as well as Canada and Mexico. Comerica reported total assets of $85.8 billion at Dec. 31, 2023. Learn more about how Comerica is raising expectations of what a bank can be by visiting www.comerica.com, and follow us on Facebook, X (formerly known as Twitter), Instagram and LinkedIn.

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