Following several months of down data, November 2010 is an up month for the Ceridian-UCLA Pulse of Commerce Index™ (PCI). Their headlines in part:
The Ceridian-UCLA Pulse of Commerce Index™ (PCI), a real-time measure of the flow of goods to U.S. factories, retailers, and consumers, grew 0.4 percent in November following three consecutive months of decline. The growth, while positive, is not enough to offset the 0.6 percent decline that the PCI saw the previous month, nor the 2.1 percent decline experienced in the PCI since July. Though on a year-over-year basis the PCI is up, the three month moving average has been declining for four months, suggesting relative weakness within the goods producing segments of the economy.
On a year-over-year basis, the PCI increased 4.5 percent in November representing the twelfth straight month of annualized growth which typically signals better sales prospects. This is slightly above the growth rates during the normal growth period from 2004 to 2006, but below levels needed for rapid recovery to the previous peak in 2007/2008 and rapid return to trend.
The PCI is anticipating a decline of 0.03 percent in industrial production in November, a forecast adjusted downward from last month’s prediction of 0.01 percent. The PCI is an early and amplified indicator, still striking a cautionary note with upper range GDP growth at 2.0 percent for the fourth quarter.
“Right now trucking looks good in various regions of the U.S.,” explained Leamer. “However, it could be symptomatic of national economic weakness, as imports from abroad can hold back domestic job formation – in manufacturing and other sectors, for example.”
Econintersect evaluates the unadjusted data which is a factor of diesel usage in the USA. Diesel usage is a remarkable economic pulse point as freight in the USA almost exclusively is moved with diesel as its source of propulsion. Both the published index and the raw unadjusted fuel use data has been fairly noisy in recent months. Most of the noise has been removed in the published index through its averaging methodology.
Unfortunately, when you average data which has significant monthly variation the sensitivity is lost to what the data is trying to say. This month, however, both the adjusted and unadjusted data are telling the same story – there is a MoM improvement.
The Ceridian-UCLA Pulse of Commerce Index endeavors to use diesel to predict economic activity. It does have a high correlation to industrial production. Econintersect does not use the index itself, but uses the raw data in concluding that November economic activity is higher than either of the last two years.
However, this is a New Normal correlation. In 2010, diesel usage was gaining on the pre-recession years until two months ago – now this trend has reversed. This is another indication the economy is not expanding as it was earlier this year.