The Ceridian-UCLA index, a real-time fuel consumption index for trucking has weakened again. Edward Leamer, Chief Economist of the Ceridian-UCLA Pulse of Commerce Index describes the economy as “She loves me, she loves me not”, this time “She loves me not.

I suggest Leamer is far too generous to the “she loves me” idea. The last three months have been flirting with contraction and the trend since mid-2010 is for ever-slowing growth.

Year-Over-Year Growth of PCI

Leamer writes “The PCI has consistently posted growth on a year-over-year basis for over two years. However, the rate of growth has slowed considerably and consistently since the middle of 2010. In May, the Index actually dipped slightly into negative territory before recovering in June — thus the “Whew!” in the figure. The July result was again positive, but at 1.0 percent, was far from robust. On an upbeat note, year-over-year comparisons will likely remain positive, perhaps substantially so, for the remainder of this year in light of the comparatively weak performance comparison to August through December last year.”

Does beating weak numbers mean much? That is the pertinent question. And I vote “no”. This chart shows the target numbers.

Interestingly that red box I added corresponds to the “weak” patch in which the Fed responded with QE2. I doubt it works next time.

Wobbly at Best

Leamer writes “The second half of 2011 has started on a down note, but is a continuation of the wobbly economic performance that has persisted since the inventory restocking period ended a year ago. Wobbly, uncertain, slow growth is likely to continue for the rest of this year as the economy seeks but does not find a catalyst. Another dip appears unlikely, however, as the traditional sources of recessions — homes and cars — are not currently positioned to produce a downturn.”

Slow Note Everywhere

We have certainly seen a “slow note” but that note is everywhere. It is in Europe, Australia, Canada, the UK, and China. Europe, Australia, and the UK are in recession right now in my opinion. Moreover, if the US is not in a recession right now, it is sure flirting with one.

Cars are a Mirage

Leamer is counting on cars and homes. I suggest strength in cars is little more than “stuffing the channel”. Car sales are counted when shipped to dealers, not when consumers buy them. Let’s see what inventory looks like in the next few months.

Housing So Bad It Can’t Get Much Worse

I agree with Leamer on housing, to this extent: Housing is so bad it is not going to subtract much from GDP. Moreover, any uptick in new sales, will be GDP additive even if it is anemic by historic standards.

However, there are no signs of improvement in housing and counting on stagnation to not pull the US into a recession can only work so long. All other stimulus is long-gone and some big negatives are coming from a forced slowdown in state spending.

Congress has had it for now, so don’t look to sugar-daddy for help.

Mike “Mish” Shedlock


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