PCI still languishes despite increase

Nov. 9, 2011
A 1.1% jump in the Pulse of Commerce Index (PCI) this October helped offset the 1% decline that occurred in September, but not enough to reverse a three-month downward trend in the index, which means the U.S. economy may remain sluggish for some time to come

A 1.1% jump in the Pulse of Commerce Index (PCI) this October helped offset the 1% decline that occurred in September, but not enough to reverse a three-month downward trend in the index, which means the U.S. economy may remain sluggish for some time to come.

“The October data offers some welcome relief from the double-dip fears that were rampant a month ago, but one month does not mean a new trend,” explained Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and director of the UCLA Anderson Forecast. The PCI is crafted by the UCLA Anderson School of Management and Charles River Associates and based on diesel fuel sales data compiled by Ceridian.

“Until we get a series of positive months, it remains a ‘she-loves-me, she-loves-me-not’ economy, with bad news followed by good followed by bad,” he said in a statement.

Over the past three months, compared to the prior three months, the PCI declined at an annualized rate of 5.8% and the PCI remains lower than it was during most of the first half of 2011. On a year-over-year basis, the PCI is up 1.3% in October compared to the 0.2% drop in September. This contrasts with the trend over the prior four months where the year-over-year change in the PCI was rapidly declining, Leamer noted.

“Given the weak PCI, the advance estimate of third quarter GDP [gross domestic product] growth of 2.5% was surprising, but the final estimate may be lower,” Leamer cautioned. “The PCI measures inventories in motion and it is noteworthy that the inventory component of GDP contributed negative 1.1% to the overall 2.5% growth rate.”

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