Thursday, March 11, 2010

Comerica Bank's Michigan Economic Activity Index: Michigan Economy Surges in January

This is excellent news. As you may or may not know, Comercia puts out quarterly economic briefings and predictions, and tracks business activity in the state using a balanced formula of leading economic indicators. Take it away, Mr. Johnson...

Comerica Bank's Michigan Economic Activity Index rose 4 points in January, to a level of 81. January's reading is the highest Index observation since November 2008. The Index for January is up 6 percent compared to the June 2009 cyclical low.

"After plateauing for three months, our Index surged in January, with eight of nine components contributing positively," said Dana Johnson, Chief Economist at Comerica Bank. "The January reading was driven by strong steel production and natural gas sales. Given the severe weather patterns experienced in the early part of this year, gas sales likely outpaced normal seasonal trends in February as well, which should give the upcoming Index another boost. Over the course of the year, the Index should continue to trend higher, reflecting an ongoing recovery in Michigan."

It should be noted that two compositional changes have been made to the Michigan Economic Activity Index. First, employment is now measured by nonfarm payrolls from the establishment survey rather than the employment estimate generated in the household survey. Second, to smooth volatility and emphasize the underlying trends in the Michigan economy, Index levels will henceforth reflect a three-month moving average. Additionally, seasonal factors estimated by Comerica have been revised as part of a semi-annual process. A complete Index history reflecting these changes is available upon request.

The Michigan Economic Activity Index equally weights nine, seasonally-adjusted coincident indicators of real economic activity. These indicators reflect activity in the construction, manufacturing and service sectors as well as job growth and consumer outlays.

Even though they made changes to the formula, those changes would seem to have the effect of dragging the Index down more than anything (i.e., a three month average as opposed to a one month jump), so this is a very positive sign indeed.

Let's keep it rolling, shall we?

And now I'm starting to get very curious about revenues coming into the state. It has become obvious that the Legislature will not address a restructuring of our tax base in an election year (or, ever), but if we can muster enough $$ to negate some of the deep cuts that are being proposed, we might just be able to save some Dem seats...

Theory being, these guys will have to vote for revenue, or vote for horrific cuts. Since they aren't inclined to do either, the best we can hope for is to maintain.

The May estimating conference will tell the tale.