Comerica Bank’s California Economic Activity Index increased in August to a level of 118.4. August’s reading is 27.6 percent above the historical low of 92.8 set in June 2020. The index averaged 107.9 points in 2020, 18.8 points below the average for all of 2019. July’s index reading was 118.3.
Our California Economic Activity Index grew by 0.1 percent in August. This marks the fourteenth consecutive monthly gain in the California Index. Four of the index components improved for the month including nonfarm employment, unemployment insurance claims (inverted), house prices and enplanements. Housing starts, industrial electricity demand, state total trade, hotel occupancy and state revenues fell in August. The growth rate of the California Index reached a strong 3.0 percent in May but has trended lower through August. We expect to see soft data again in September as households altered spending behavior and businesses postponed a broader return to office due to the surge in COVID-D cases. The end to enhanced unemployment benefits in early-September also weighed on household incomes for the month. We look for the California Index to return to stronger growth as COVID cases continue to trend lower and labor markets improve through yearend. The rapid recovery of the overall U.S. economy is causing ongoing supply chain bottlenecks at California ports as increased demand for goods outpace capacity for storage and distribution. To address congestion issues, the Ports of Los Angeles and Long Beach announced that they will begin fining shipping companies for containers that remain at terminals for too long starting in November. We still expect supply chain constraints to persist well into 2022.
