The Ceridian-UCLA Pulse of Commerce Index, issued today by the UCLA Anderson School of Management and Ceridian Corporation, fell 1.7 percent in January following the 0.4 percent decrease in December*. January's data places the PCI 2.2 percent below year-ago levels with essentially no growth in the year-and-a-half since the summer of 2010.

"It seems difficult to square the behavior of the PCI with the evident improvement in a number of economic indicators, most notably the increase in payroll jobs and the decrease in initial claims for unemployment," said Ed Leamer, chief economist for the Ceridian-UCLA Pulse of Commerce Index and Director of the UCLA Anderson Forecast. "The PCI also seems out-of-sync with Industrial Production and with Real Retail Sales, which continue to grow in a healthy manner while the PCI is stalled out."

The year-over-year changes in the PCI, however, make it look very accurate – the three-month moving average peaked at 8 percent in July 2010 and has fallen steadily to essentially zero percent in January. "The PCI year-over-year peak in 2010 and the deterioration throughout 2011 have correctly anticipated the same movement of Industrial Production, Total Business Real Inventories, and Real Retail Sales. The weakness in the PCI is suggesting either further weakness in these indicators or a big gain in trucking in February, March and April," said Leamer.

"Last month we wrote 'think 2, not 3 percent' meaning that the PCI was too weak to support a quarterly growth forecast as good as 3 percent. The initial estimate released by the Bureau of Economic Analysis has come in at 2.8 percent, which is within the range of points suggested by the PCI, but had a contribution from inventories equal to 1.9 percent. This is significantly above the roughly zero value expected by the PCI."

Based on the latest PCI data, the forecast for January Industrial Production is a 0.44 percent decrease when the government estimate is released on February 15.