The Ceridian-UCLA Pulse of Commerce Index, a real-time measure of the flow of goods to U.S. factories, retailers and consumers, fell 0.3 percent in January, giving up some, but retaining much of, December’s 1.8 percent sequential gain. On a year-over-year basis, the PCI increased 3.4 percent in January, making it the 14th straight month of year-over-year growth.
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.
Yet another factor affecting January’s PCI figure is the record-breaking snowfalls being experienced in the United States this winter.
From a regional perspective, the heavily traveled Northeast and North Central regions of the nation were hit particularly hard, experiencing a “category 3” snowstorm from Jan. 9 to Jan. 13. Data show that trucking was off by about 1 percent to 2 percent during this time. It was also noted that across the regions activity was stronger at the end of the month than it was in the beginning.
“Some of December’s growth was driven by an unusually strong performance during the week between Christmas and New Year’s,” explained Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast.
“This combined with the treacherous winter storms likely detracted somewhat from the January result. However, when viewed in the context of a three-month moving average, the PCI clearly shows that the economic recovery remains on track.”
On a monthly basis, the PCI tracks closely to the Industrial Production Index (to be released later this month) and GDP.
For December, the PCI forecast of plus 0.6 percent growth was very close to the Fed’s reported number of 0.8 percent. For January 2011, the PCI forecasts plus 0.3 percent growth in IP.
As stated in last month’s PCI report, “the surge in the December PCI makes us more positive about GDP for Q4, but still feel that GDP could come in below the current consensus (of about 3.5 percent) when released later this month,” which is in fact what happened with GDP growth for the fourth quarter reported to be 3.2 percent.
“From an absolute standpoint, GDP is now slightly ahead of the previous peak reached in Q4 07. But the PCI and Industrial Production are still about 5 percent below their previous peaks – meaning that the goods producing component of GDP is still well below its previous high,” said Craig Manson, senior vice president and index expert for Ceridian. “We are not yet seeing PCI growth robust enough to drive meaningful gains in employment.”
Based on their experience and the PCI data, both Leamer and Manson suggest that there could be major revisions coming to the inventory and import related components within the U.S. Bureau of Economic Analysis’ initial Q4 2010 GDP report.
“Growth comparisons for the PCI on a year over year basis – particularly in the first half of the year - remain difficult. Nevertheless, our outlook for 2011 is for continued economic recovery and we expect GDP to grow at the historically “normal” rate of 3 percent, accompanied by a persistent level of high unemployment,” added Manson.
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