Michigan Output, Highest Economic Activity Since July 2006

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Comerica Bank’s monthly Michigan Economic Activity Index grew in September by 4.2 percent to a level of 129.4. The last time the index was this high was in July 2006.

”Because it’s an index number, I look at its direction rather than its level,” says Robert Dye, chief economist at Comerica Bank, noting that the index clocked in at 72.1, its lowest point over the past five years, in 2009. “When you look at the graph, you see the economic activity bottomed out in 2009 and has been steadily improving since then.”

Dye says that a number of components go into the composition of the index — nonfarm payrolls, exports, sales tax revenue, hotel occupancy rates, continuing claims for unemployment insurance, building permits, and vehicle production. 

In September, factors including a surge in residential building permits and vehicle manufacturing contributed to the index’s growth. However, Dye wouldn’t be surprised if the next index report takes a slight dip.

“Quite often, building permits are somewhat volatile,” Dye says. “Very strong numbers are often followed by a weaker number. I wouldn’t be surprised to see a bit of a weaker number for the index in the next month or two, although that would not indicate an overall decline in the Michigan economy.”

Even so, auto sales — which are central to the state’s economy — are expected to show improvement for November and into the next year, Dye says.

In related news, the Southeast Michigan Purchasing Managers Index for November is 58.3, down from 63.1 in October. Despite a slow-down in the rate of growth, the three-month average for the economy registered a robust 60.4. 

“Purchasing managers attribute the slow-down to a weakening in production and new orders as well as employment and commodity prices,” says Nitin Paranjpe, a supply chain faculty member at Wayne State University’s School of Business Administration, who interpreted this month’s results.  “However, it’s important to note that even with November’s drop in the overall PMI, each sub-index is above 50, solidly confirming continued growth in our economy.”

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