Ceridian-UCLA Pulse of Commerce Index is up 2.4 percent in December 2010

On the heels of a 0.4 percent increase in November, the December edition of the Ceridian-UCLA Pulse of Commerce Index (PCI) took a sharp turn north with a 2.4 percent increase.

Prior to the gains of the last two months, the PCI was down 0.6 percent in November and 0.5 percent and 1.0 percent in September and August, respectively.

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 latest PCI data further evidences the positive economic sentiment felt since the start of the New Year,” said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast, in a statement. “However, we have not entirely escaped the summer doldrums as the three-month moving average is still below its July 2010 level.”

On an annual basis, the PCI is up 4.1 percent compared to December 2009, which marks the 13th straight month of annualized growth and follows a solid December 2009. What’s more, the report pointed out that the previous 11 months of annual growth in 2010 were up against weak 2009 comparisons.

The December edition of the PCI noted that December retail sales is expected to top 2009’s performance during the same period but may pale when compared to market expectations. And it added that much of increase for the December PCI was due to a “stronger than usual” week between Christmas and New Year’s Day. What’s more, the PCI said that December was 3 percent less than the previous December peak month in 2007, with diesel fuel purchases during that same week in 2010 beat 2007 levels.

This month’s report also noted how the PCI is expecting a 0.6 increase in industrial production for December, and it added that the PCI outlook for the fourth quarter GDP is more optimistic but will be less than current consensus estimates.

December’s 4.1 percent annual growth was described as “particularly encouraging,” considering that December 2009’s PCI was also solid, according to Todd Dooley, Ceridian Senior Vice President of Finance, in an interview.

“Inventory replenishment by retailers drove some of December’s activity, coupled with some optimism about the economy in 2011 also driving it as well,” said Dooley.

Dooley also noted that Ceridian’s Stored Valued Solutions business, which provides gift card services for large retailers, saw mid-to-high single digit growth in the activation of new cards throughout the holiday season, which falls in place with the steady economic pace which has been occurring.

But for economic recovery to truly come to fruition, Dooley said more job growth is needed. And while job numbers show some signs of improvement, people looking for employment in manufacturing and construction are not being put back to work.

“Until job growth really hits its stride, the broader economy will likely continue to struggle,” said Dooley. “Shorter-term, comparisons on a year-over-year growth basis for the first five months of 2011 are going to be low comparisons. In early 2010, annual growth was in the 5-to-8 percent range. If we are going to grow, we are going to need continued economic expansion off of the early 2010 comparison levels.”

A slow, steady and unspectacular economic recovery continues to be the primary outlook, though, said Dooley.  But something to watch out for is increasing fuel prices, which have been ongoing for nearly 4 months.

And as fuel prices rise from a consumer standpoint, it impacts disposable income, he said. From a business perspective the uncertainty of energy prices may slow down spending patterns as well, as gas prices remain concerning.

For more information on the UCLA-Ceridian Pulse of Commerce Index, click here.