The PCI in the second quarter on an annualized basis is only 2.1 percent higher than the first quarter. This translates into a PCI-based forecast for second quarter GDP growth of 1.8 percent, the same as the GDP growth for the first quarter.
Background for this conclusion:
The different phases of the economy over the past four years are much clearer, because the PCI is an early and amplified indicator of GDP. Notably, the PCI turned negative in the second half of 2007, offering an early warning sign of what was to come. Furthermore, during the recession, the PCI decline exceeded the GDP decline by a factor of three. Following that, the PCI indicated a clear recovery that lasted four quarters, with growth exceeding 6 percent (twice normal). In contrast, the last four quarters have been weak ones for the PCI. We’ve described this period with a trucking metaphor — idling — to
suggest that things will improve dramatically when and if the trucks start rolling again!
The PCI is modeled using Ceridian’s diesel distribution network to forecast economic growth – primarily Industrial Production and GDP. Econintersect extracts the unadjusted (not modeled) diesel index for its economic model. Graphically, the unadjusted data has a slightly different feel.
First, the Ceridian’s adjusted data which improve 2.2% year-over-year:
After dipping slightly in May, the June year-over-year growth is again positive. This is particularly encouraging because June of the prior year was strong. The year-over-year comparisons get easier in the second half of the year, which bodes well for continued strength in year-over-year performance in the PCI.
Econintersect’s view using the unadjusted data clearly shows a down trending data set based on a 3 month moving average – even though growth was 2.2% YoY this month (versus 2.1% last month).
The data is indicating a low spot in this economic sub-cycle. If July’s data shows an uptick in the three month moving average – it will confirm a new strengthening cycle.
Container Traffic Continues Growth in May 2011 by Steven Hansen
June 2011 Rail Traffic Effected by Collapse of Coal Carloads by Steven Hansen
Trucking Tonnage Down 2.3% in May 2011 by GEI News