State Coincident Indexes

The Philadelphia Federal Reserve Bank’s estimates of state coincident activity for June continue to show that most states are experiencing reasonably healthy growth. As was the case for May’s first set of numbers, the June results show that over the prior 12 months, 32 states had increases in their indexes in the 2 to 4 percent range. The outliers were also very similar to May’s, with Massachusetts the only big state on the high side, and Illinois and Michigan being the two big states on the low side. As has consistently been the case recently, Nevada was the h leader, with an increase a bit north of 5 percent. No states reported a 12-month decline (Michigan’s increase was the lowest—a meager .1%). In general, Western states appeared stronger than the East.

Over the three months ending in June West Virginia was again the leader, with a big 2.4% rise. Rugged terrain was clearly in favor, since Montana was second, Colorado third, and Vermont fourth! (Rhode Island, which if states were ironed flat would be even smaller compared to the other three just noted, was third). Of the 15 states with 3-month growth higher than 1 percent, 11 were in the west (New Jersey and Maine joined West Virginia and Maine as the fastest-growing Eastern states over this period). This western set included Texas and California. 13 states—mostly east of the Mississippi—had growth under .5% over the last three months, with Michigan’s index falling in that period. New York was in that low-growth group.

As was in the case in May’s initial round, Montana had the largest one-month increase in the initial results for June, well above second-place New Jersey (players of the original Atlantic City version of Monopoly should make note of how appropriate is for New Jersey to win second prize in this beauty contest). Only two states, Wisconsin and Kentucky, registered declines in the fairly erratic monthly results.

The June results continue to show growth appears stronger in the West than in the East. There had been some earlier indications that growth was becoming more uniform across the nation, but the West has apparently regained momentum relative to the East. Parts of the industrial Midwest look soft, most notably Michigan. However, we have reached the time of year that the comparison of this report with other data has become problematic. Data from the payroll employment report are the most important inputs to the coincident indexes. But while we will be getting word of the benchmark revisions in a few weeks, these will not be reflected in the state numbers until next March. Also, the indexes are calibrated to match trends in a state’s real GDP. From now until November, the state real GDP series will not themselves be consistent with the recently revised national GDP series. So the coincident indexes will be built from data whose revisions we have some reasonable expectations, and set to match data that is formally inconsistent with national trends.