Fuel-based Economic Index Slips in February

Severe winter storms froze the economic recovery in February, driving the Ceridian-UCLA Pulse of Commerce Index down 0.7 percent. That followed a 0.6 percent January increase in the index, an economic indicator based on diesel fuel consumption.

The index results indicate U.S. economic growth was essentially flat in the first two months of 2010, following a robust December, when the index climbed 2.8 percent.

They also indicate that more than inventory replenishment was behind the December increase. If that 2.8 percent spike was caused by pre-holiday inventory stuffing, the index would have fallen steeply in January and February, Ceridian-UCLA said.

"February was disappointing, but the geographic pattern underlying the index suggests this was due in large part to extreme snowfalls during the month," said Edward Leamer, director of the UCLA Anderson Forecast and chief economist for the PCI Index.

The index, which closely follows the Federal Reserve's Industrial Production Index, is based on data from Ceridian's electronic fuel card system, which captures the location and volume of diesel fuel being purchased by trucking companies.

Regional PCI figures were worse in areas hit hard by February storms, declining 4.1 percent in the East North Central region, 2.5 percent in the Mid-Atlantic and 0.8 percent in the Mountain region. The PCI grew 2.7 percent in the West North Central region, 2.6 percent in the West South Central states and 2.1 percent in the Pacific region.

The low overall growth rate isn't enough to sustain rapid economic expansion and new hiring, the index's director warned. "We still need much stronger growth in the PCI to get Americans back to work. To sustain at least a 4 percent GDP number for the first quarter, the March PCI has to be significantly stronger at over 1 percent growth."

"That number will be very important," said Leamer. "It will reveal where the economy is headed and whether March truly is a catch-up month after a snowy February."

Contact William B. Cassidy at wcassidy@joc.com.