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Carolinas Grew Slowly in May 2023
The Comerica Carolinas Economic Activity Index rose by 1.4% in three-month annualized terms in May 2023 and was up a modest 0.2% from a year earlier, the slowest year-ago growth since October 2020. Four of the index's nine components rose in May, while five declined.
The Carolinas' labor market is strong, with employment rising by 15,700 in May. The labor market has improved notably from late last year, with the unemployment rate falling to 3.3% in May from 3.7% in November 2022 and holding well below the national rate. Additionally, continuing claims for unemployment insurance rose very modestly through May.
Housing starts soared by 21.0% in May, but were down by about a tenth in the first five months of 2023 from the same period last year. House prices rose for the fifth consecutive month and have fully recovered to their peak last July. Rising population, employment growth, and limited housing supply bode for further price appreciation in the rest of 2023 despite high interest rates. The tourism sector eased further in May, with seasonally-adjusted hotel occupancy declining for the fourth consecutive month to four percentage points below January's level. Air passenger volumes, adjusted for seasonality, fell again in May and have declined in three of the first five months of the year. Seasonally and inflation-adjusted sales and use tax revenues, a proxy for consumer spending, pulled back sharply by 2.0% in May and were down 7% from a year earlier. The pullback isn't surprising as sales and use tax revenues were up strongly in the first four months of the year.
The Carolinas' economy grew 3.0% in 2022, well above the national economy's 2.1% expansion. The Carolinas' economy lost considerable momentum in the first quarter and was up 1.0%, lagging the national economy's growth rate of 2.0%. Looking forward, the Carolinas' strong labor market and continued population growth will help it weather a cooler national economy. However, economic growth will be slower this year than in 2022 due to headwinds from cost of living pressures, high interest rates, and spillovers from weaker national and global economies.
