California Economic Activity Index is Up for 13th Month

Comerica Bank’s California Economic Activity Index increased in July to a level of 118.3. July’s reading is 27.6 percent above the historical low of 92.7 set in June 2020. The index averaged 107.9 points in 2020, 18.9 points below the average for all of 2019. June’s index reading was revised to 116.4.

The California Economic Activity Index improved by 1.6 percent in July and is now up for the 13th consecutive month. In July, six of the sub-indexes increased including nonfarm employment, house prices, industrial electricity demand, hotel occupancy, enplanements and state revenues. Three sub-indexes fell for the month including unemployment insurance claims (inverted), housing starts and state total trade.

The California Index continued to post solid gains through July and is expected to increase again with August’s numbers. The rise in COVID cases this summer was met with broader access to effective vaccines. California new COVID cases peaked at lower levels than the winter wave and have trended lower in September. The expected expansion of vaccine eligibility to younger cohorts in the next few months will help normalize back-to-school and back-to-office going into early 2022.

There could be gyrations in California consumer spending this fall as federal unemployment benefits are winding down and the enhanced weekly subsidy ended in early September. However, California has also averaged 111,000 net new jobs per month since February. Strong labor demand and rising wages will help offset some of the drag from reduced unemployment benefits. California’s recovering tourism sector also saw more positive news with the announcement that international air travel will resume in November for fully vaccinated foreign travelers.