DALLAS - The Comerica (NYSE:CMA) California Economic Activity Index showed no change for the second consecutive month through October, and experienced a 1.6% increase compared to the previous year. The index, which is a composite indicator of the state's economic activity, revealed mixed signals with six of its components showing growth while three witnessed a decline.
Employment in California saw an addition of 34,500 jobs, although the job growth rate for the year has been approximately half of what it was in 2022. Continuing claims for unemployment insurance remained elevated, surpassing 400,000 for six months in a row. The unemployment rate in the state has increased by 0.7% since December 2022, reaching 4.8%. Industrial electricity sales, often used as an indicator of industrial production, fell by 1.5% in October, indicating a possible slowdown after three months of strong performance.
The housing market presented a complex picture. Housing starts increased for the second month in October but were still approximately 7% lower in the first ten months of the year compared to the same period in 2022. Despite this, house prices in California's three largest metro areas—Los Angeles, San Francisco, and San Diego—continued to rise, marking a 7.1% increase from January 2023.
Tourism, an essential sector for the state, showed signs of weakening, with hotel occupancy and air passenger traffic both declining. This downward trend in tourism is reflected in the fourth consecutive month of reduced air passenger traffic. The state's real fiscal revenues have also seen a significant drop from the previous year due to decreased personal income and corporate tax receipts.
While California's real GDP grew robustly in the first three quarters of 2023, Comerica's Index suggests that economic momentum may have slowed in the fall. Factors such as housing challenges, high interest rates, persistent inflation, and reduced consumer spending are contributing to this deceleration. Additionally, the national tech slowdown continues to impact California's economy.
Comerica Bank, the creator of the index, is a Dallas-based financial services company with a presence in several U.S. states and a history dating back 175 years. The bank's total assets were reported at $85.8 billion as of December 31, 2023.
InvestingPro Insights
As Comerica Bank's California Economic Activity Index provides a snapshot of the state's economic trends, it's also beneficial to consider the financial health and outlook of Comerica itself. According to recent data from InvestingPro, Comerica boasts a market capitalization of $7.08 billion and a Price/Earnings (P/E) ratio of 8.25, reflecting a valuation that could be attractive to value investors. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands slightly lower at 8.13, which may indicate a stable earnings perspective relative to the stock price.
InvestingPro Tips highlight that while analysts have revised their earnings expectations downwards for the upcoming period, and the company suffers from weak gross profit margins with an expected drop in net income this year, Comerica has maintained dividend payments for an impressive 53 consecutive years. This consistency in dividend payments, coupled with a strong return over the last three months of 43.34%, could be a sign of resilience and a commitment to shareholder returns.
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