The Ceridian-UCLA Pulse of Commerce Index, a real-time measure of the flow of goods to U.S. factories, retailers and consumers, fell 1.5 percent during the month of February.
Coupled with the 0.3 percent loss from January, this latest data eliminates the strong gain (1.8 percent) experienced in December 2010.
However, February marks the 15th straight month of year-over-year growth indicating that economic recovery, while fragile, remains under way.
The Ceridian-UCLA Pulse of Commerce Index is based on real-time diesel fuel consumption data for over the road trucking and serves as an indicator of the state and possible future direction of the U.S. economy.
By tracking the volume and location of fuel being purchased, the index closely monitors the over the road movement of raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumers.
“The PCI performance in the first two months of this year suggests weakness in some parts of the economy,” states Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast.
“Nevertheless, our outlook for 2011 is for continued economic recovery – we expect GDP to grow at the historically “normal” rate of 3 percent, accompanied by a persistent level of high unemployment.”
Over time, the PCI has shown a strong correlation with the government’s Industrial Production (IP) figures. For January, the PCI forecast of modest growth (.3 percent) was more positive than the Fed’s initial reported estimate of negative 0.6 percent.
For February 2011, the PCI estimates that IP will experience a slight decline of 0.02 percent when it is reported on March 17.
Similarly, relative weakness in the PCI over the first two months of this year suggests that GDP for the first quarter will come in below consensus, near the lower end of the range of current forecasts that range between 2 percent and 5.5 percent.
For the year, the index continues to suggest GDP growth sufficient to drive continued modest growth in employment but not back to the peak levels attained in late 2007.
“February’s spike in diesel fuel prices to well over $3 a gallon likely did not drive the weakness in the PCI this month,” explained Craig Manson, senior vice president and index expert for Ceridian.
“However, if the trend persists, higher prices will likely have an impact in the coming months as consumers are robbed of spending power. As a leading indicator for the goods producing segment of the economy, the PCI is sensitive to this dynamic and should provide early indications of direction and magnitude as higher fuel prices impact the broader economy.”
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