The Ceridian-UCLA Pulse of Commerce Index (PCI), a real-time measure of the flow of goods to U.S. factories, retailers and consumers, fell .5 percent in September after falling 1.0 percent in August - the first time the index has experienced a consecutive monthly decline since January 2009. Furthermore, August and September 2010 together produced the worst combined two-month decline since the recessionary months of January and February 2009.
The decline indicates four consecutive months of limited to no increases in over-the-road movement of produce, raw materials, goods-in-process and finished goods since the PCI peaked in May 2010. Moreover, the PCI forecasts GDP growth in the third quarter of 2010 at an anemic 0.7 percent to 1.7 percent, below the PCI's previous 1.5 to 2.5 percent estimate reported last month (which at the time approximated the consensus economic view). The PCI forecast of the Federal Reserve's monthly Industrial Production (IP) index also signals IP growth for September to be very close to zero with an even chance for a negative number.
"The PCI tells us that inventory is stalled on the nation's thoroughfares. The good months of growth are now seemingly in our rear view mirror," said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. "Our economy's loss in traction is alarming and for the 'Cassandras of the double-dip,' may foretell a coming decline in GDP and spike in unemployment. However, with residential investment, consumer durables, business spending, and other component indicators already at or near record lows relative to GDP, it remains unlikely that we will experience an outright decline into recession."
The PCI began 2010 strongly with the first quarter 9.7 percent above the fourth quarter of 2009. However, the second quarter was only 6.2 percent above the first, and now the third quarter has increased a mere 2.1 percent above the second. In sum, over the course of the year, growth of the PCI has become less and less, edging toward zero.
"The ray of hope is that year-over-year (September 2010 to September 2009) the PCI is up 5.8 percent, representing the 10th straight month of growth," said Craig Manson, senior vice president and index expert for Ceridian. "Year-over-year growth, however, has continued to fall since May's exceptional 9.0 percent number. And though we remain in recovery, the tepid growth says our economy lacks the energy to drive employment in the near term.
From the May 2010 high, year-over-year growth in the PCI hit 8.6 percent in June, 8.0 percent in July, 6.0 percent in August and now 5.8 percent in September. PCI results need to reach 10 to 15 percent year-over-year growth for a healthy job market.
"October data will be especially telling as this is the peak month for America's trucking industry and a strong prelude to the holiday season. We'll be eager to see what the PCI reports this time next month," added Manson.
