The economic recovery may be waiting for consumer spending to pull it out of a stall, according to Minneapolis-based Ceridian Corp.’s latest economic index, which tracks movement of goods around the country.
The Ceridian-UCLA Pulse of Commerce Index (PCI), issued by the UCLA Anderson School of Management this morning, fell 0.3 percent from March to April and is showing flat overall performance during the first four months of 2010, said Todd Dooley, senior vice president of finance for Ceridian and one of the developers of the index.
The PCI is based on an analysis of real-time diesel fuel consumption by over-the-road trucking companies derived from Ceridian’s electronic and stored value card payment processing services.
The more cautious tone differs from a decidedly bullish note sounded in March, when the index showed robust growth. That earlier report prompted Ed Leamer, the PCI’s chief economist, to project 4 percent GDP growth for the first quarter, well above consensus estimates of 3 to 3.5 percent growth and actual growth of 3.2 percent reported by the U.S. Bureau of Economic Analysis (PDF).
With three months of no growth, the April PCI reflects the continuing weak labor market and early reports on April retail sales, consistent with a zero GDP quarterly growth outlook for the second quarter. “The optimism felt in the fourth quarter is not reflected in what we are seeing today,” Dooley said, and reflects “an evolution in our view.”
Despite the recent slowdown, the PCI index is still up 6.5 percent on a year-over-year basis, the fifth straight month of steady increase at “better than normal” levels. However, year-over-year growth of 10 to 15 percent in the PCI is required to drive down the unemployment rate, and the modest rate of recovery “is not enough to put Americans back to work,” Dooley said.
“The latest PCI numbers are disappointing and cast considerable doubt on the strength of the recovery and the strength of GDP numbers for 2010,” said Leamer in the release. “The next two months will tell if the first quarter’s healthy consumer spending will help lift the PCI and propel stronger GDP growth for the year.”
The U.S. Department of Commerce recently reported that growth in consumer spending accelerated to 3.6 percent in the first quarter, up from 1.6 percent growth in the fourth quarter.
Dooley pointed out that consumer spending “is not factored into the second quarter (PCI forecast) … People out spending money has a pull-through effect on the economy.”
Ceridian said in its release that “consumers were back to their profligate ways in the first three months of this year, spending freely, and creating a need for more inventories in the supply chain and more trucking in the months ahead. But it will take income growth and job growth to sustain that rate of growth of consumer spending.”
The Ceridian-UCLA Pulse of Commerce Index also provides data for the nine Census regions. Five of the nine regions were weak in April, explaining the overall PCI decline of 0.3 percent. Heavy trucking areas such as the East North Central region (e.g., Ohio and Michigan) fell 1.7 percent, the South Atlantic region (e.g., Virginia and the Carolinas) declined 1.1 percent and the East South Central was down 0.4 percent. The significant West South Central region experienced zero growth in April. The West North Central region, ranging from Minnesota and the Dakotas to Missouri and Nebraska, declined 0.2 percent.
Ceridian developed the index last year with UCLA and claims that it closely tracks the Federal Reserve’s monthly Industrial Production index. The PCI forecast for industrial production has been declining each month and now indicates industrial production is likely to grow by 0.4 percent in April, down from an earlier projection of 0.64 percent growth. Industrial production numbers are due to be released on May 14.