The Ceridian-UCLA Pulse of Commerce Index (PCI), a real-time measure of the flow of goods to U.S. factories, retailers and consumers, surged 2.4 percent in December and pushed the PCI above its previous 2010 peak established in May. This performance, combined with November’s 0.4 percent increase, was enough to offset three previous consecutive months of decline.
“The latest PCI data further evidences the positive economic sentiment felt since the start of the New Year,” explains Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “However, we have not entirely escaped the summer doldrums as the three-month moving average is still below its July 2010 level.”
On a year-over-year basis, the PCI increased 4.1 percent in December, in line with the November and October year-over-year comparisons. Importantly, growth in December comes on top of a very strong year-ago performance whereas the previous 11 months of year-over-year growth in 2010 were up against relatively weak prior year comparisons. It should be noted, however, that the 4.1 percent growth figure is only slightly higher than the 3 percent growth characteristic of a normal economy.
Early indications also show that December retail sales performance played out as stated in the PCI’s November announcement: “The holiday sales season will likely be better than last year, but potentially disappointing versus current expectations in the marketplace.” Much of the December PCI increase is attributable to the fact that the week between Christmas and New Years was stronger than usual. Even though December overall was 3 percent below the previous December peak month in 2007, diesel fuel purchases in the inter-holiday week exceeded 2007 levels.
“This is partly a consequence of Christmas and New Years falling on weekends, but also likely reflects inventory replenishment driven by a combination of consumption and restocking as the country’s mood elevated regarding growth in 2011,” says Craig Manson, senior vice president and index expert for Ceridian. “This heightened activity in the retail space is confirmed by the performance of Ceridian’s Stored Value Solutions business (a leading global provider of gift card solutions to large retailers) where card activations grew in the mid-single digits during the month.”
The PCI tracks closely on a monthly basis to the Industrial Production Index and GDP. Though the forecasts for subsequent growth remain weak, the December surge translates into a very favorable growth of industrial production by .6 percent. Similarly, the PCI outlook for fourth quarter 2010 GDP is more optimistic, but is still expected to be less than current consensus estimates.
In addition, the PCI provides data for the nine Census regions. Eight of the nine regions experienced positive growth this December, compared with only five of nine in November. New England, however, was down again – 0.5 percent – following two previous monthly declines.