A measure of the flow of goods to U.S. factories, retailers and consumers by Minneapolis-based Ceridian Corp. points to a slow start for the year and shows the fragility of the economic recovery.
The Ceridian-UCLA Pulse of Commerce Index (PCI) fell 1.5 percent in February after dropping 0.3 percent in January, wiping out a strong 1.8 percent gain in December.
As a result, the PCI chief economist projects a slight 0.2 percent decline in industrial production for February and 2 percent gross domestic product growth in the first quarter — which is at the low end of the range of economists’ estimates.
But the index creators point out that February marks the 15th straight month of year-over-year growth “indicating that economic recovery, while fragile, remains under way.”
“The PCI performance in the first two months of this year suggests weakness in some parts of the economy,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “Nevertheless, our outlook for 2011 is for continued economic recovery — we expect GDP to grow at the historically ‘normal’ rate of 3 percent, accompanied by a persistent level of high unemployment.”
For the year, the index continues to suggest GDP growth sufficient to drive continued modest growth in employment but not back to the peak levels attained in late 2007, according to Ceridian.
The index, launched last year, captures at-the-pump diesel fuel sales data by fleet trucks moving goods through the interstate highway system and correlates changes in the index with industrial production and GDP growth.
The strong spike in fuel prices since January, driven by uncertainty in the Middle East, may take a few months to work through the economy, but the PCI seems particularly well positioned to detect that impact in real time.
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“February’s spike in diesel fuel prices to well over $3 a gallon likely did not drive the weakness in the PCI this month,” said Craig Manson, senior vice president and index expert for Ceridian. “However, if the trend persists, higher prices will likely have an impact in the coming months as consumers are robbed of spending power. As a leading indicator for the goods-producing segment of the economy, the PCI is sensitive to this dynamic and should provide early indications of direction and magnitude as higher fuel prices impact the broader economy.”
Industrial production figures are scheduled to be released by the Federal Reserve on March 17.