Reports on several respected measures of economic activity in the U.S. indicate the ongoing recovery may be weaker than expected—but they also show motor carriers overall continues to perform well. The key with these reports is to understand the good news for trucking is in the details.
While the Ceridian-UCLA Pulse of Commerce Index (PCI) grew 0.4% in November after three consecutive months of decline, that wasn’t enough growth to offset October’s 0.6% decline in the PCI, nor the 2.1% decline experienced since July.
Though on a year-over-year basis the PCI is up, the three-month moving average has been declining for four months. That suggests relative weakness within the goods producing segments of the economy, explained Craig Manson, senior vp & index expert for Ceridian, which provides the diesel fuel consumption data on which the PCI is based.
“Standing by itself, the PCI reading for November is not bad. We’re seeing some economic growth and you can’t sneeze at that,” Manson told FleetOwner.
“But it’s not nearly enough growth to offset the drop in October, much less the decline over the last three months,” he pointed out. “We would really need a substantial surge in the PCI this December to reach fourth quarter GDP [gross domestic product] growth expectations of 2.5%. As the PCI data stands now, we’d not even reach 2%.”
The PCI closely monitors the over-the-road movement of raw materials, goods-in-process and finished goods to U.S. factories, retailers and consumer by tracking the volume and location of fuel being purchased. The raw fuel purchasing data collected by Ceridian is crunched by economists at the UCLA Anderson School of Management and Charles River Associates to obtain a “real-time” measure of the flow of goods to U.S. factories, retailers, and consumers, said Manson.
“In short, November’s ‘up’ is relative to a low bar so the growth is only mildly encouraging,” explained Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “The flatness we’re seeing with the latest PCI data reflects inventories in motion, which seem to be signaling a weak fourth quarter.”
Other metrics are sluggish as well. While the Institute for Supply Management’s (ISM) non-manufacturing business survey committee reported that economic activity in the non-manufacturing sector grew in November for the 11th consecutive month, that growth dropped off from October.
ISM’s non-manufacturing business activity index decreased 1.4% points to 57%, reflecting growth last month in the service sector but at a slower rate than in October.
Despite the slowness of the recovery, however, motor carriers should continue to do well, according to UCLA’s Leamer. “Right now, trucking looks good in various regions of the U.S.,” he explained. “However, it could be symptomatic of national economic weakness, as imports from abroad can hold back domestic job formation – in manufacturing and other sectors, for example.”
“There has been less anxiety about the economy in recent months, but markets are still fragile,” added Ceridian’s Manson. “We still have not seen evidence of enough growth to instill confidence in the economic outlook for the fourth quarter and early 2011.”