Wednesday, August 11, 2010

Pulse of Commerce Index points to continued growth


This index (I'm showing the seasonally-adjusted, 3-mo. moving average version of the index) of real-time diesel fuel consumption by many thousands of trucks criss-crossing the country correlates strongly to industrial production and almost as strongly to GDP. July data is included in this chart, and it suggests we might see a somewhat stronger-than-expected industrial production report next week. In any event, the index has been climbing steadily for more than a year, and is showing no sign of any slowdown in the pace of economic growth.

This is a fairly new index and I have only been following it for the past several months, but it looks pretty decent. You can see more details and versions of the index here.

HT to John Sturges for alerting me to today's July release.

13 comments:

CDLIC said...

Scott,

In light of economic improvements in the short run --in preparation for the not so distant future--it may be wise to pay attention to the following article by Paul B. Ferrell titled "Reagan insider: 'GOP destroyed U.S. economy'" regarding what appears to be a clarion warning to the wise. Go to: http://www.marketwatch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10?siteid=e2eaol

Your thoughts?

Mark Gerber said...

CDLIC,
Thanks for posting that article. I look forward to reading Scott's thoughts on Stockman's statement as well. (I'll withhold my own comments to Stockman's eye opening perspective for now.)

John said...

I realize it is time for election posturing and while I abhor arguing politics it is apparant these things are going to enter into the economic discussions...which is fine with me...I just enjoy these specific topics less.

It is fashionable these days for the party in power to blame their troubles on previous governments. However to me it is a bit of a stretch to lay the blame for our (currently) dead-in-the-water economy on a government that has been a 'super minority' for nearly two years. The economy has supposedly been the top priority of this government since its inauguration. Yet it appears it has been ignored since the great 'sugar high' givaway early in '09 which did little to sustain lasting economic energy. Once passed, the government focused on health care which will increase business costs and uncertainty. More uncertainty has been created with the financial regulations (with many yet to be written and are ambiguous). We are also in the dark on tax policy. Everyone knows they are going higher, but we don't know how high or for whom.

Banks have plenty of money to lend and businesses have $2 Trillion on their balance sheets to invest (not to mention their access to capital markets) and consumers' savings rates are in the neighborhood of 6%. There is money everywhere. What is lacking is confidence. And I place the blame for that that squarely in the lap of the current government. They have had two years of dominance to solve the problem, and it appears that with unemployment stuck at nearly 10%, budget deficits going parabolic, and GDP growth even by optimistic estimates too low to budge it, they have failed. I submit that if this were a Republican government the Democrats would be every bit as critical.

In the early fall of '08 immediately prior to the election our economy was hit with the Lehman Bros bankruptcy...which politicly, rightly or wrongly, blamed on the republicans. The results speak for themselves. Today, while not as bad, an uneasy apprehension hangs over our population. Consumer confidence is low, businesses are not hiring, and uncertainty reigns. Again, this government has failed to inspire the greater public that things are going to get better soon.

This rant, due to length, is in two parts. Part 2 follows.

John said...

Part 2

In the early fall of '08 immediately prior to the election our economy was hit with the Lehman Bros bankruptcy...which politicly, rightly or wrongly, was blamed on the republicans. The results speak for themselves. Today, while not as bad, an uneasy apprehension hangs over our population. Consumer confidence is low, businesses generally are not hiring, and uncertainty reigns. Again, this government has failed to inspire the greater public that things are going to get better soon.

I am an observer from afar of the political process. I am largely agnostic as to who controls the levers of power in Washington so long as the policies foster a robust economy that creates wealth. I submit that this government has concentrated its efforts not on wealth creation but on a Robin Hood - like redistribution (spread the wealth). I give you our stock market performance as evidence. Pessimism dominates. The public investor has long fled and demonstrates no evidence of returning. Trading is dominated, not by investors, but by high frequency trading computers designed for tearing profits from as little as hourly price movements. Liquidity is the lowest I have seen in my investing lifetime (which spans decades). Price gaps, up and down, are common and wild swings in the averages can frighten even sophisticated and experienced participants.

All this is characteristic of a nearly universal lack of confidence in the future on the part of the national business community without which the chronic unemployment and economic growth troubles we face cannot be solved. This administration and congressional government has shown me little evidence that knowledge of the solutions exist in their experiences.

Sorry guys, but I just cannot swallow blaming prior governments for the malaise we find ourselves in today. We need 'change we can believe in'.

Scott, thank you for your tolerance of all here who post their opinions.

This rant is (thankfully) over.

Frozen in the North said...

John:

A whole 18 months to fix the economy, and you pronounce Obama's policy a failure because he didn't fix the economy!

The U.S. is "enjoying" a balance sheet recession (too much debt -- don't let the trillion dollar in on balance sheet cash fool you). There is no final demand growth, companies don't invest when there is no final demand, earnings are up, profits are up too but driven entirely by cost compression. Top line is doing very little of the heavy lifting.

Rant all you want, but to think that Obama could "fix" the economy in 18 month is so naive its almost unbelievable. At best government can set up the ingredients for optimism, but that's about it. When there is no demand (the home ATM is dead) there is no investment. You can cut tax or regulation but that doesn't get final demand up.

Its not too hard to understand...I hope

Scott Grannis said...

Re Stockman: I've never been a fan of Stockman since he abandoned supply-side principles and argued in favor of higher taxes to balance the budget. I think he's too quick to concede that the level of spending is Ok but taxes are too low. I'm an anti-spending guy, and I think taxes should be kept as low and as flat as possible.

Stockman does make some good points, however. Nixon's devaluation of the dollar was a horrible horrible thing, putting him at or near the bottom of my list of bad presidents. GW Bush's inability to veto any spending bills was a tragedy, helping set the stage for Obama & Co.

But I totally disagree with him on these points:

Lower tax rates are not responsible for the big budget gap we face today--spending is. If the gap between rich and poor has widened in recent decades (arguable), then I would point the finger to misguided government policies and a very steep marginal tax rate curve which conspire to make it very difficult for those in the middle class to clear the high tax hurdle necessary to make it to the upper class. In any event, it is a fact that the rich are paying an ever-increasing share of total tax burdens, so I don't know why anyone would be griping about he rich not paying their fair share. If anything, I think it's a bad thing that a small percentage of the population pays the lion's share of taxes. That's a prescription for a tyranny of the majority.

Nobody that I'm aware of directed Wall Street to grow, and I would argue there is no way of knowing in advance if that were going to be a good or bad thing in any event. I am a firm disbelliever in industrial policy in any form.

There is nothing wrong with outsourcing jobs. Indeed, outsourcing jobs and international trade are a key source of global prosperity. What's good for China and India is good for us. In fact, companies would be doing harm to their shareholders if they did not always seek to find the cheapest labor, regardless of location.

Scott Grannis said...

Re Stockman: I've never been a fan of Stockman since he abandoned supply-side principles and argued in favor of higher taxes to balance the budget. I think he's too quick to concede that the level of spending is Ok but taxes are too low. I'm an anti-spending guy, and I think taxes should be kept as low and as flat as possible.

Stockman does make some good points, however. Nixon's devaluation of the dollar was a horrible horrible thing, putting him at or near the bottom of my list of bad presidents. GW Bush's inability to veto any spending bills was a tragedy, helping set the stage for Obama & Co.

But I totally disagree with him on these points:

Lower tax rates are not responsible for the big budget gap we face today--spending is. If the gap between rich and poor has widened in recent decades (arguable), then I would point the finger to misguided government policies and a very steep marginal tax rate curve which conspire to make it very difficult for those in the middle class to clear the high tax hurdle necessary to make it to the upper class. In any event, it is a fact that the rich are paying an ever-increasing share of total tax burdens, so I don't know why anyone would be griping about he rich not paying their fair share. If anything, I think it's a bad thing that a small percentage of the population pays the lion's share of taxes. That's a prescription for a tyranny of the majority.

Nobody that I'm aware of directed Wall Street to grow, and I would argue there is no way of knowing in advance if that were going to be a good or bad thing in any event. I am a firm disbelliever in industrial policy in any form.

Scott Grannis said...

further to Stockman:

There is nothing wrong with outsourcing jobs. Indeed, outsourcing jobs and international trade are a key source of global prosperity. What's good for China and India is good for us. In fact, companies would be doing harm to their shareholders if they did not always seek to find the cheapest labor, regardless of location.

Scott Grannis said...

Further on Stockman:

He completely distorts the history and the impact of federal debt. The amount the government owes only makes sense if you compare it to GDP. Debt and deficits relative to GDP were comparatively tame until two years ago, then they both started exploding. If we have a problem with debt, it started in late 2008 on Bush's watch and it Obama has only made it worse.

He also distorts the 2009 revenue picture. Revenues fell because the economy had collapsed, not because of any tax cutting.

On balance, Stockman makes way too many errors to be credible.

Benjamin said...

On Stockman-
You add Stockman's observations to those of Redleaf.Vigilante, and it is hard to come away believing in the R-Party much.
Yes, both Stockman and R/V are right-wing purists, and probably do not understand much that politics in a democracy is the art of compromise.
Still, what these fellows say mirrors my own views of the party. It is corrupt, addicted to deficits, and deeply tied to the spending on Defense, USDA, VA, Homeland Security, Interiors and and Commerce--70-80 percent of federal spending that is funded by income taxes.
But they say they want to cut taxes.
In other words, the R-Party will run huge deficits good times or bad--as we witnessed in the Reagan-Bush-Bush presidencies.
I wish I could write otherwise, and no, I do not think the Democrats are any better.

John said...

Benj,

I think it is fair to say our nation has not had the best leadership during the last decade. Both parties have contributed to the current troubles.

Frozen,

Thank you for your comment. I did not expect universal agreement.

I see the problems we face as formidable yet solvable by a government that recognizes business and commerce as a necessary part of the solutuion. I see little evidence that the people in charge overall, are of that persuasion. They see business as part of the problem, and 'enlightened' government as the solution (see Paul Krugman's recent writings). It is my belief that this plays a large role in why the economy is not responding more vigerously from the recession. There is ample evidence that fiscal and monetary policy is very accomodative but government cannot compel businesses to invest or consumers to spend if confidence in the future is lacking. Good political leadership and governance can go a long way toward fostering that confidence. I simply do not believe we have that with this bunch.

There are many who disagree (doubtless you are among them) and that is fine. Again, thank you for reading and commenting.

BBL said...

Scott: Are you familiar with Comsumer Metrics Institute as an LEI?

Your opinion, please!

Scott Grannis said...

BBL: This is a relatively new index so no one can authoritatively say whether it's good or bad at what it purports to do. There's always the possibility that this was put together in a way that maximized its ability to call the recent turns in the economy, but that it might not work going forward. I don't know enough about its composition and methodology to say.

But it's clear that the index has become the favorite of those predicting a double-dip recession. My own collection of favorite indicators is not giving any indication of a double-dip. It will be interesting to see what happens.