DALLAS, Dec. 13, 2022 /PRNewswire/ -- The Comerica California Economic Activity Index declined at a 5.8% annualized rate in the three months through September. The Index has slowed from the robust increases in the first half of the year. The index was still up 5.8% from a year earlier in September, but this overstates its strength since its month-over-month growth stalled last autumn.
Seven of the Index's nine components fell in September. Employment rose, but by a modest 5,300, well below the 65,300 average gain of the first eight months of the year. Continuing claims for unemployment insurance rose for the third consecutive month, suggesting California's labor market is in fact softening. Electricity consumption by California's industrial sector fell in September and was down 3.2% in the third quarter compared to the second.
Housing starts unexpectedly rose for a second consecutive month in September, while house prices fell for the fourth consecutive month and were down 6.8% compared to May. Housing affordability is a longstanding problem in California and has gotten worse as first home prices and then interest rates surged post-pandemic. Further declines in house prices and weak residential investment are likely going forward. The travel industry lost significant momentum in the third quarter: Hotel occupancy rates were down 4.6 percentage points from the second quarter, and air passenger traffic fell 10.2%.
California's economy faces headwinds from a weakening housing sector, rising interest rates, high inflation, and slowing consumer spending, and is expected to lose momentum in the coming months. The slowdown in the tech sector, a key industry of the Californian economy, is an additional 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 is a subsidiary of Comerica Incorporated (NYSE: CMA), 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 relationships, and helping people and businesses be successful. In addition to Texas, Comerica Bank locations can be found in Arizona, California, Florida and Michigan, with select businesses operating in several other states, as well as in Canada and Mexico. Comerica reported total assets of $84.1 billion as of Sept. 30, 2022.
SOURCE Comerica Bank