by Calculated Risk on 2/10/2010 01:48:00 PM

The UCLA Anderson Forecast, Ceridian Corporation and Charles River Associates have introduced a new index using real-time diesel fuel consumption data: Pulse of Commerce Index^TM

Press Release: New Ceridian-UCLA Pulse of Commerce Index(TM) Reveals Need for Economic Reality Check as January Number Declines

Results from a major new econometric report – the Ceridian-UCLA Pulse of Commerce Index™ by UCLA Anderson School of Management – show the U.S. economy fell in January after a significant increase in December, with the index falling at an annualized rate of 36.8 percent. The more reliable three-month moving average for January managed to show a 3.3 percent gain at an annualized rate following the exceptional annualized rate of 14.6 percent in the previous month.

The index is based on an analysis of real-time diesel fuel consumption data from over the road trucking tracked by Ceridian Corporation. ... It mirrors closely the Federal Reserve's Industrial Production Index but is issued days before that index is released.

"Though the January 2010 number is disappointing, the index is 3.6 percent above its January 2009 level and is similar to year-over-year pre-recession values," said Edward Leamer, director of the UCLA Anderson Forecast and chief economist for the Ceridian-UCLA Pulse of Commerce Index. "Also, the three-month moving average is 2.3 percent above the previous year's value, which is the first time that there has been a year-over-year increase since April 2008, 21 very difficult months ago."

The latest PCI numbers suggest caution about celebrating the recently announced 5.7 percent GDP growth number. Although the 7.3 percent growth rate in the fourth quarter of 2009 for the PCI was strong, at that rate the index won't exceed the 2007 second quarter peak until the third quarter of 2011. "Things are going to have to look a lot better in February and March to turn this worry into optimism about the power of the recovery," Leamer said. "Stay tuned. We expect this showing in January indicated by the PCI will also be seen in the Industrial Production number when it is released later this month."

Click on graph for larger image in new window.

This graph shows the index since January 1999 (monthly and 3 month average). There is significant variability month to month.

Note: As Professor Leamer noted, this index appears to lead Industrial Production (IP), but there is a significant amount of monthly noise. So the one month decline in this index does not mean IP will decline in January (to be released next week), but the three month average suggests IP growth might have slowed.

This will be an interesting index to follow along with the Trucking and Railroad data.