Wednesday, August 11, 2010

Stat of the Day: Ceridian-UCLA PCI Predicts Growth

Another stat that continues to confirm a slow but steady recovery. Contrary to the huge down day today on fears of a double dip, most of the economic data continues to suggest the economy is making very positive progress. Whether the drop today is due to slower growth from China or the meaningless lagging words from the FED, it's clearly disconnected from reality.

The Ceridian PCI is a measure of the diesel traffic used in the US. According to their information, traffic increased by 1.7% in July and over 8% from last year. So after a weak spot in June, the market appears to be back on track. Not to surprising considering the US economy is growth and global economies like China continue to grow at a fast clip even if its down to say 9% from 12%. It still adds up to increased traffic and hence growth.

  • Though the PCI fell significantly in June, a careful examination of the daily data revealed that June was not as bad as the headline number suggested because of a late Memorial Day and due to the second half of June being stronger than the first. This more positive interpretation of the June data has now been confirmed with a strong July PCI.
  • Year-over-year growth for July of 8 percent represented the eighth straight month of mid to high single digit year-over-year percentage growth after approximately two years of decline. The sustained growth is welcome news; however, the PCI needs to reach year-over-year growth of 10 to 15 percent in the near term to drive a meaningful increase in employment.
  • "The key takeaway from the July report is that the economy continues to recover – which is encouraging – but the pace needs to substantially pick up to put people back to work," said Ed Leamer, chief PCI economist. "With the unemployment rate still at 9.5 percent and consumers understandably nervous about opening their wallets, it is hard to be very optimistic about economic growth. On the other hand, there is nothing about the PCI that is supportive of the pessimistic double-dip view."

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