–Econ projects 2% GDP growth in 4th quarter

By Ian McKendry

WASHINGTON (MNI) – Recent data from the trucking industry indicates
the economy is “sluggish” and GDP growth in 2011 may fall short of what
some economists are forecasting.

“We think the economy is significantly slowing, and the GDP growth
in the 4th quarter is not going to be all that great,” Ed Leamer,
director of UCLA Anderson Forecast told Market News International on
Monday.

“We are not gonna have the V-shaped episode that is typical of
these recessions,” Leamer added.

Leamer, who works alongside human resources company Ceridian to
publish a monthly index called the Ceridian-UCLA Pulse of Commerce Index
showed economic growth has been flat the past three months.

The Pulse of Commerce Index, or PCI which tracks diesel fuel
purchases up to the half-second at 7,000 truck stops around the country
was up 0.4% in November, but was down 0.6% in October and down 0.5% in
September.

“While the PCI’s most recent data shows growth, it is not
substantial enough to offset the loss from the third quarter,” Leamer
said in the release of the November PCI on Tuesday.

Leamer went on to explain to MNI how the PCI effectively measures
economic activity by tracking the flow of goods to and from U.S
factories as well as consumers and retailers through trucking activity.

Leamer said by using the PCI it appears the buildup of inventories
that helped boost U.S. GDP last year is not present this year.

“Nothing has replaced the inventory rebuilding as far as the goods
and transit are concerned,” Leamer said.

Leamer said in his view, and from what the PCI is indicating is
U.S. GDP will grow by 2% in the fourth quarter, which is in the lower
range in terms of consensus forecasts.

“The goods part of the economy, that is still suffering and not in
recovery mode,” Leamer said, adding that the PCI has been signalling for
three months that the economy is weak.

When asked how the PCI compared to the Bureau of Labor Statistics
most recent employment report, Leamer said the data was similar to what
the PCI has indicated.

“What is notable about it, is both manufacturing and construction
jobs are down, and that is the goods part of the economy,” Leamer said,
noting that a lot of construction and manufacturing jobs have gone
overseas.

“Our own view of the [GDP] forecast is we are going to have an OK’
year going forward, but not a great year unless we can get construction
and manufacturing jobs returning in large numbers,” Leamer said.

While the overall PCI indicated the economy is stalling, certain
geographic areas showed more promise.

For instance, the California index improved 3.6% in November, and
Leamer said the Pacific region in general appears to be healthier.

The Mountain region which contains states such as Colorado, Utah,
New Mexico, Nevada and Idaho also improved by 1.3% for the month.

The weakest area was the East South Central which includes states
such as Alabama, Mississippi and Tennessee, which Leamer said was a
somewhat ominous sign because there tends to be a high concentration of
trucking in that area as well as the central region of the country.

On a year-over-year basis the PCI increased by 4.5% in November,
and 4.1% in October, but added that yearly growth is below what is
needed for a “rapid recovery” to reach 2007 and 2008 levels.

The PCI also helps project Industrial Production, which it now is
anticipating a 0.3% decline in the November headline number.

Speaking from a more macro perspective, Leamer said there still
remains a lot of cash on the sidelines as firms remain uncertain of
future economic climates.

“There is still a lot scope for equity prices to appreciate because
of all that cash,” Leamer said.

** Market News International Washington Bureau: 202-371-2121 **

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