Comerica Bank's California Index Down Sharply Again in November

The Comerica California Economic Activity Index dropped by 3.7% annualized for the three months ending in November, despite being 5.0% higher year-over-year.

Rhea-AI Summary

The Comerica California Economic Activity Index dropped by 3.7% annualized for the three months ending in November, despite being 5.0% higher year-over-year. Only 3 of 9 index components increased, while 5 declined. Employment rose by 19,900, but California's unemployment rate increased to 4.1%, posing challenges to key sectors, notably tech. Housing starts rebounded, yet house prices fell by 7.6% from May's peak, exacerbating affordability issues. Overall, California's economy faces headwinds including slowing consumer spending and high mortgage rates, indicating a likely economic softening ahead.

Positive

• Employment rose by 19,900 in November.
• Comerica California Economic Activity Index remains 5.0% higher year-over-year.

Negative

• Index fell 3.7% annualized in November.
• California's unemployment rate rose to 4.1%, indicating potential job market weaknesses.
• House prices have declined for six consecutive months, dropping 7.6% from May's peak.
• High mortgage rates may lead to further declines in housing prices.
• Travel industry momentum decreased with a 3.6% drop in air passenger traffic.

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DALLAS, Feb. 23, 2023 /PRNewswire/ -- The Comerica California Economic Activity Index fell 3.7% annualized in the three months through November, but was still up 5.0% from a year earlier.

Only three of the nine components that constitute the Index rose in November, while five declined and one was unchanged. Employment rose by 19,900, and continuing claims for unemployment insurance fell in the month, after four consecutive monthly increases. However, California's unemployment rate rose to 4.1% in November and is up 0.3 percentage points from its recovery-to-date low in September. The unemployment rate is likely to rise further in the coming months, as key sectors like tech face strong headwinds. California's industrial production likely contracted in the fourth quarter given declines in industrial electricity consumption in October and November.

Housing starts rebounded in November, but house prices fell for a sixth consecutive month and were down 7.6% from May's peak. Housing affordability is a longstanding problem in California and high mortgage rates make further declines in house prices likely. The travel industry lost momentum as it entered the fourth quarter, too. The seasonally adjusted hotel occupancy rate fell 1.1 percentage points in November following a 2.5 percentage point decline in the third quarter. Seasonally-adjusted air passenger traffic was down 3.6% in November after a 5.9% contraction in the third quarter. California's economy is expected to soften in the coming months amid headwinds from a weakening housing sector, high interest rates and inflation, and slowing consumer spending. On top of these issues weighing on the national economy, the tech slowdown 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 Michigan, California, Florida and Arizona. Additionally, Comerica has select businesses operating in Canada and Mexico. Comerica reported total assets of $85.4 billion as of Dec. 31, 2022.

To subscribe to our publications or for questions, contact us at ComericaEcon@comerica.com. Archives are available at www.comerica.com/insights.

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SOURCE Comerica Bank

FAQ

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What does the Comerica California Economic Activity Index indicate for November 2023?

The index fell by 3.7% annualized in November 2023, signaling economic slowdown.

What was California's unemployment rate in November 2023?

California's unemployment rate rose to 4.1% in November 2023.

How much did housing prices decline in California as of November 2023?

Housing prices in California fell by 7.6% from May's peak as of November 2023.

What trends are affecting California's economy mentioned in the press release?

California's economy faces headwinds from high mortgage rates, inflation, and slowing consumer spending.

What sectors are expected to be affected by the unemployment rate increase in California?

Key sectors like technology are expected to face challenges due to the rising unemployment rate.