Michigan Economy Up After Mild Winter

Story first appeared in The Detroit News.

Bolstered by the mild winter and continuing weakness in housing, the auto rebound is spreading to other parts of the Michigan economy, boosting economic conditions to their best level in six years.

According to a new Comerica Bank estimate of the state economy, the recovery is starting to reach beyond Detroit's Big Three. That trend also is reflected in the February jobs report released Wednesday, which showed that during the past 12 months the state added as many jobs in business and professional services as it did in manufacturing.

Another piece of encouraging economic news released Thursday was the state's announcement that personal income in Michigan grew at the strongest rate since 2000, just before Michigan entered its decade-long "one-state recession."

Comerica's index measures nonfarm payrolls, exports, sales tax revenues, hotel occupancy rates, continuing claims for unemployment insurance, building permits and motor vehicle production.

All seven of those improved in January, sending the index up 7 points, to a level of 98, the highest since January 2006.

Despite potential threats, including higher gas prices and defense spending cuts, Dye sees the economy emerging from its halting recovery to a stronger expansion.

While the economy got a bit of a boost from the mild winter, which kept home heating and other bills down and left more money in consumers' pockets, there's more to the current improvement than warmer temperatures and short snowfalls.

With auto sales recently topping an annualized rate of 15million vehicles, consumers seem to be unleashing some of the pent-up demand they've been holding in since 2007. The auto industry also benefits from the lack of any significant improvement in the housing market. With home values down and still dropping in most of the country, consumers aren't shopping for new homes.

Experts see rising gas prices as a threat to auto sales for the Detroit carmakers, now that they're offering more fuel-efficient models. The experts added that they see gas prices easing and dropping to $3.60 to $3.70 a gallon by summer.

And while higher gas prices may trim some pickup and SUV sales, car sales won't be lost to the foreign nameplates as in past periods of increased fuel prices.