Thursday, October 14, 2010

Pulse of Commerce Index weak but not likely a threat


The September UCLA-Ceridien Pulse of Commerce Index was weak, and it has been weak for a few months now. After healthy growth over the previous year, this index suggests the economy took a pause in the third quarter, and that seems consistent with other indicators that suggest the economy slowed down somewhat. The important thing is whether this presages further weakness. I seriously doubt it, and the folks at UCLA make this sensible observation:

This unfavorable news could be taken by the Cassandras of the double-dip as an alarm of a coming decline in GDP and another spike up in unemployment. The slowing growth of the PCI this year is similar to the behavior of the PCI in 2007 which presaged the recession that began in January of 2008. That recession produced major declines in the volatile cyclical components of GDP — residential investment, consumer durables and business spending on equipment and software. With all three of these components at or near record lows relative to GDP, it seems unlikely that any of them could contribute much to an outright GDP decline, and the other components of GDP do not have histories that suggest they could produce an outright decline either.

3 comments:

Benjamin said...

Excellent postings by Scott Grannis.

But jeez, that's a pretty meek set of indicators. I do not see a house on fire, or any inflationary pressures anywhere on the horizon. This is the Caspar Milquetoast of economies.

M Miller said...

I think its best to look at all transport together, including rail. I was suprised to hear that FedEx is starting the process of shifting large amounts of truck transport to rail. They think the rails are now timely enough to use as part of their trucking service. This is a major shift. So trucking (diesel usage) is being distorted somewhat by the huge increase in intermodal rail usage in the trucking backhaul chain. Rail traffic very strong.

Scott Grannis said...

MM: good point, I was not aware of the FedEx change.