The recovery slowed down last month, but don’t blame bad weather or soaring oil prices.
That’s how UCLA economist Ed Leamer reads the latest dip in the Pulse of Commerce Index he oversees. It tracks diesel fuel consumption by trucks delivering goods and as such provides a glimpse into next week’s release of U.S. industrial production data, not to mention gross domestic product growth.
On a year-over-year basis, the UCLA index has risen 15 consecutive months, suggesting that a weak upturn remains on track. But fuel use showed a month-on-month decline in both January and February, taking it back to levels last seen in November.
This backsliding suggests that first-quarter GDP numbers will disappoint the bullish economists who are predicting annual growth toward the more robust end of the spectrum, the 4%-5% range that would be consistent with strengthening job creation and perhaps, heaven forfend, rising wages.
“For the year, the index continues to suggest GDP growth to be in the ‘normal’ historical range of about 3%, which will likely drive continued modest growth in employment but not back to the peak levels attained in late 2007,” UCLA and business services outfit Ceridian say in releasing the latest index reading.
Since February was an eventful month, marked early by huge snowstorms on the East Coast and later by an oil price spike, there is a temptation to write off the weak performance to those events.
But Leamer says the data collected by UCLA and Ceridian don’t bear that out.
The February daily data were impacted by the massive snowstorm that was centered in the heavily-trucked Midwest early in the month. However, the daily data also suggests that much of the volume that was “lost” during the first week of the month was “found” later in the month, meaning that weather was not the major reason for the decline in the PCI this month.
So much for that. What about the case for blaming the oil price spike? Again, not so much.
February’s spike in fuel prices likely did not contribute to weakness in the PCI this month. 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 shipping and production, the PCI is very sensitive to this dynamic and should provide an early indication as higher fuel prices impact the broader economy.
If UCLA and Ceridian do say so themselves, of course.
To venture a bit further into this admittedly self-promotional territory, Leamer says the real-time data collection behind the Pulse of Commerce Index could point to a brave new world of economic indicators that will allow sober-eyed analysts to bat down the empty excuse-making that is so prevalent now.
“The habit now is to cook up reasons to explain numbers you don’t expect,” says Leamer. “Looking at transactions in real time, you can put some real teeth behind these conjectures.”
Now we just have to figure out if we want that.
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