Leamer: Pulse Of Commerce Index Measures More Than Fuel

October 06, 2011


HAI: Can you kind of give me an example of how the index might have showed a trend or something missing from the other economic data points?

Leamer: I’m a forecaster and the biggest mistake I made was early in 2008. I said we’re not really in a recession yet. And the GDP number for the second quarter was positive. That’s one thing. But also the initial payroll numbers that came from the BLS [Bureau of Labor Statistics], they had declining payrolls, but at about 50,000 per month, whereas a real recession is more like 150,000 to 200,000 a month. So I say, well, this isn’t a real recession; it’s going to have to get worse in order for it to be classified as a real recession.

Wouldn’t you know, they revised the darn numbers. We didn’t have it at that time, but our index was declining very substantially. It was absolutely clear we were in big trouble second quarter of 2008. There was absolutely no ambiguity.

HAI: So the Pulse of Commerce Index tells you more about the movement of goods?

Leamer: Correct. The energy guys think it’s an energy index, but we don’t think of it that way. We think of it as inventories in motion. In other words, in order to get the product from point A to point B, you’ve got to buy the diesel fuel.

HAI: What’s the index telling you now?

Leamer: That August was down 1.4 percent and July was down 0.4 percent. So we’re in a situation that looks like a double dip. We’re having enough of a decline that if you didn’t know anything else, you’d be worried about a double dip. But I’m not worried about a double dip.

HAI: Why is that?

Leamer: All the other indicators that I look at don’t indicate that it’s a double dip. I interpret it as a period of very slow growth, not a real decline. For it to be a real recession, the index would have to continue its decline for several more months.

HAI: Does the index give you a sense of what gas prices are?

Leamer: Yes, it does that. When there have been big swings in diesel prices, I’ll put in the monthly report a paragraph that shows how diesel prices have changed. I was talking with the Department of Transportation this morning, who was keenly interested in this data set, too.

HAI: How does the truck industry use this information?

Leamer: Both Wall Street and truckers have a tendency to focus on year-to-year comparisons. If you’re an asset manager, the year-to-year can be totally misleading, because it could have been a huge up followed by a huge down and it made it look like you were OK year-to-year, but the last half of the year was really down.

It’s kind of interesting that trucking is much less on the weekends than it is on the weekdays. The peak day of trucking is Wednesday. Saturday and Sunday are about half the volume of Wednesday. And the reason that’s important is the number of Saturdays and Sundays in any given month varies from year to year. So if you don’t make a weekday correction, you get misled about the month-to-month changes.

A data set, because of daily data, allows us to do that. It allows us to correct for wandering holidays. With our daily data, we can make those kinds of corrections, and/or we can focus on the periods of time that are not affected by the holiday. You go plus or minus four or five days and the holiday affect is gone. Because we have daily data, we can do it that way. It’s a much richer data set for determining where the economy actually is.

HAI: On the same note, what season is the heaviest volume for fuel sales?

Leamer: October and August. October is the big month. By big, I mean average daily deliveries. Because there are days in early December that are actually the peak days. The second half of December has low volume because of the two holidays. So December as a month is not the peak. But if you ask me when the peak week was, it would probably be the first/second week of December. The peak month is October. And then August is the next one.


(For a larger view, please click on the image above.)

Find your next ETF

Reset All