January 11th, 2012
Econintersect: The December 2011 Ceridian-UCLA Pulse of Commerce Index (PCI) showed an increase of 0.2% following the 0.1% increase in November and the 1.1% increase in October. This is evidence of a expanding economy. This index is designed to anticipate GDP.
The synopsis provided by Ceridan-UCLA:
The PCI annualized rate of growth of 0.5% in the fourth quarter is consistent with an estimated GDP growth in the range of 0.0-2.0%. Although Wall Street economists have jacked up their “backcasts” for fourth quarter GDP growth to 3% or higher, the fundamentals as indicated by the fourth-quarter PCI are not so favorable. The PCI measures inventories destined for factories, stores and homes, and the third quarter decline in the PCI correctly anticipated the large negative contribution of inventories to GDP growth.
Over the last two quarters, real retail sales have been growing more rapidly than the PCI. The first half of 2012 may be an inventory-rebuilding period, allowing inventories to make a substantial contribution to GDP growth. This would be very supportive of the recent improvement in the labor market, which may finally be entering a positive-feedback loop during which more jobs help create even more jobs.
PCI correlation with Industrial Production The weakness in the PCI this month translates into continued weakness in the PCI-based forecast for Industrial Production. The predicted value for December’s Industrial Production based on the PCI is 0.3%.
See GEI Analysis Blog for complete Econintersect analysis.