A 0.9% decline in the Ceridian-UCLA Pulse of Commerce Index (PCI) being reported for May, which follows a 0.5% dip in April, is an indication that economic growth in the U.S. is slowing down considerably.
“The index has now declined in four of the first five months of 2011 and in eight of the past twelve months, making it clear that the ‘high-growth’ economic recovery [in the U.S.] lasted only four quarters – from the third quarter of 2009 to the second quarter of 2010,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast for the UCLA Anderson School of Management
“On a year-over-year basis, the PCI was flat in May [and] this was disappointing in that it ended a string of seventeen straight months of year over year improvement in the index,” he added.
“One small glimmer of good news is that May was the strongest month in all 2010, and the PCI for May of this year nearly cleared that hurdle,” noted Leamer. “Nevertheless, the PCI showed no growth, and this is another indication that the economy is stuck in neutral.”
The PCI is based on real-time diesel fuel consumption data from the over-the-road trucking compiled by Ceridian Corp. and then analyzed by economists at the UCLA Anderson School of Management and consulting firm Charles River Associates. 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, Ceridian noted.
UCLA’s Leamer pointed out that, according to the economists at the National Bureau of Economic Research (NBER), the “Great Recession” officially ended in June of 2009, with the PCI indicating the recovery period occurred from June of 2009 through July of 2010, with the PCI growing at an annualized rate of 10%.
“[However,] this growth was driven primarily by inventory restocking, and unfortunately was not accompanied by a resurgence in home sales nor employment gains,” he stressed. “Since that time, the economy has been idling and struggling to grow. The PCI slid a bit in the second half of 2010 as the force of inventory restocking inevitably receded, and since then has been on a wobbly, less than 3% growth trend. This has resulted in less-than normal GDP growth with unusually high variability.”
“Over time, the PCI has proven to be a leading and amplified indicator of both Industrial Production and GDP,” explained.
“The May result further reinforces our long-held cautious outlook for below consensus growth in U.S. GDP [gross domestic product], and suggests that second quarter GDP growth will be less than 2%,” added Craig Manson, senior vp and index expert for Ceridian. “Similarly, the PCI anticipates industrial production to show modest growth of 0.05% percent for May.”
