Trucking news: Ceridian-UCLA Pulse of Commerce Index down 0.5 percent in September

As various economic indices, freight metrics, and trucking companies are reporting declining and stagnant volumes during the second half of the year, the most recent Ceridian-UCLA Pulse of Commerce Index (PCI) appears to be following suit, as the PCI declined 0.5 percent in September, following a 1.0 dip in August.

The preceding months to a large degree also reflected an uneven economy and very slow recovery, with May down 3.1 percent, June down 1.9 percent, and July up 1.7 percent. Back-to-back declines in August and September mark the first time that has occurred in the PCI since January and February 2009.

The PCI, according to Ceridian and UCLA, is based on an analysis of real-time diesel fuel consumption data from over-the-road trucking and is tracked by Ceridian, a provider of electronic and stored value card payment services. The PCI data is accumulated by analyzing Ceridian’s electronic card payment data that captures the location and volume of diesel fuel being purchased by trucking companies. It is based on real-time diesel fuel purchases using a Ceridian card by over the road truckers at more than 7,000 locations across the United States.

The PCI closely tracks the Federal Reserve’s Industrial Production data as well as GDP growth.

“The PCI tells us that inventory is stalled on the nation’s thoroughfares. The good months of growth are now seemingly in our rear view mirror,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast, in a statement. “Our economy’s loss in traction is alarming and for the ‘Cassandras of the double-dip,’ may foretell a coming decline in GDP and spike in unemployment. However, with residential investment, consumer durables, business spending, and other component indicators already at or near record lows relative to GDP, it remains unlikely that we will experience an outright decline into recession.”

What’s more, the PCI noted that September’s decline represents four straight months of limited or no increases in over-the-road movement of produce, raw materials, goods-in-process and finished goods since the PCI peaked in May 2010.  And according to the PCI, GDP growth in the third quarter of 2010 is forecasted to be in the range of 0.7 percent to 1.7 percent, which the previous PCI forecast of 1.5 to 2.5 percent estimate reported last month.

With economic growth linked directly to unemployment, the current outlook—with unemployment just below 10 percent nationwide—remains grim. On an annual basis, the September PCI is up 5.8 percent, but annual growth needs to be in the 10-to-15 percent range to indicate a healthy job market, according to the report’s authors.

Ceridian Senior Vice President of Finance Todd Dooley told LM that this month’s data is reflective of a slow, steady, unspectacular recovery.

“The low single digit growth is not enough to put people back to work,” he said. “The thing that is disturbing is the continued downward trend in year-over-year growth. It peaked in May at 9 percent and has kept ticking down since then, which gives you pause for concern.

While inventory rebuilding drove strong volume growth in the first half of the year, it has clearly subsided since then. Dooley said he equates inventory building to shipment data the PCI captures, with those shipments growth rates declining on an annual basis for four months. Although growth is still occurring, Dooley observed it is happening at a decelerating rate.

Looking ahead, Dooley said the really interesting question is: what happens with shipments in October, which is typically the busiest month of the year for the domestic trucking sector?

“October is an early predictor…to what consumer spending may be like during the holiday season,” said Dooley.  “Until people go back to work and feel good about their prospects, the money is not going to flow, goods are not going to be consumed, houses won’t be bought, and cars won’t be purchased or leased. It is all about getting people back to work.”

These sentiments were echoed at the recent Council of Supply Chain Management Professionals Annual Conference in San Diego, with many trucking executives telling LM they remain somewhat guarded about future growth prospects until more economic growth occurs in a sustained and meaningful way. And Dooley said that according to feedback Ceridian has received from the trucking industry is that volume growth is steady and continual, with volumes growing but not at a great rate.

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