All signs continue to point to an economy in recovery with the latest release of the Ceridian-UCLA Pulse of Commerce Index (PCI) by UCLA Anderson School of Management. The July PCI climbed 1.7 percent after dropping 1.9 percent in June.
Though the PCI fell significantly in June, a careful examination of the daily data revealed that June was not as bad as the headline number suggested because of a late Memorial Day and due to the second half of June being stronger than the first. This more positive interpretation of the June data has now been confirmed with a strong July PCI.
Year-over-year growth for July of 8 percent represented the eighth straight month of mid to high single digit year-over-year percentage growth after approximately two years of decline. The sustained growth is welcome news; however, the PCI needs to reach year-over-year growth of 10 to 15 percent in the near term to drive a meaningful increase in employment.
“The key takeaway from the July report is that the economy continues to recover – which is encouraging – but the pace needs to substantially pick up to put people back to work,” said Ed Leamer, chief PCI economist.
“With the unemployment rate still at 9.5 percent and consumers understandably nervous about opening their wallets, it is hard to be very optimistic about economic growth. On the other hand, there is nothing about the PCI that is supportive of the pessimistic double-dip view.”
As a leading economic indicator, the PCI also offers insight on expected quarterly GDP results. Last month, the PCI forecasted second quarter GDP growth of 2.5 percent, essentially matching the subsequent release of the federal government’s initial GDP Q2 estimate of 2.4 percent.
“The PCI continues to establish credibility as a reliable, relevant economic indicator, which is critical to delivering meaningful insight into the health of the economy,” said Craig Manson, senior vice president and index expert for Ceridian.
“Analysts and business leaders need reliable economic data to guide them in developing economic models, forecasts and strategic plans. With the GDP Q2 figure virtually matching the PCI’s earlier projection, it’s become increasingly clear that the PCI is a timely, leading indicator that provides meaningful insight into the current condition of the economy.”
July marks the beginning of the third quarter and the latest PCI results suggest Q3 GDP growth of 4 percent, but only if the momentum continues. GDP quarterly growth of 5 to 6 percent is required to significantly impact the unemployment rate. According to Leamer, “The third quarter PCI is starting off strong, but we will need an exceptional August and September to support the current forecast of 4 percent GDP growth for Q3.”
The Ceridian-UCLA Pulse of Commerce Index also provides data for the nine Census regions. Each area improved with the New England region (e.g. Maine and Vermont) growing an impressive 4.1 percent and the West North Central region (e.g. Minnesota and Missouri) climbing 3.5 percent. On the low end, the East South Central region (e.g. Alabama and Tennessee) stood at 0.0 percent after dropping 3.7 percent in June and the South Atlantic region (e.g. Florida and South Carolina) increased 0.3 percent.
The PCI is based on an analysis of real-time diesel fuel consumption data from over the road trucking tracked by Ceridian, a global provider of electronic and stored value card payment services and human resources solutions.
By analyzing payment card data for the location and volume of diesel fuel purchased by truck operators, the PCI provides a detailed picture of the movement of goods and materials across the United States.