Devoid of momentum

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 0.5% in September after falling 1% in August, which is the first time the index has experienced a consecutive monthly decline since January 2009.

August and September 2010 together produced the worst combined two-month decline since the recessionary months of January and February 2009, according to the PCI statement.

"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."

OTHER PCI NOTES
• 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% to 1.7%, below the PCI’s previous 1.5% to 2.5% estimate reported last month.

• The PCI began 2010 strongly with the first quarter 9.7% above the fourth quarter of 2009. However, the second quarter was only 6.2% above the first, and now the third quarter has increased a mere 2.1% above the second. In sum, over the course of the year, growth of the PCI has become less and less, edging toward zero.

• From the May 2010 high, year-over-year growth in the PCI hit 8.6% in June, 8% in July, 6% in August and now 5.8% in September. PCI results need to reach 10% to 15% year-over-year growth for a healthy job market.

• The PCI also provides data for the nine Census regions. Following the widespread declines of the August PCI, every region of the country continued this downward trend in September except the Mountain region (e.g. Utah and Colorado), which grew by 1.7%, and the East South Central (e.g. Tennessee), which grew by 0.5%.