Pulse of Commerce Index still looking healthy

The Ceridian-UCLA Pulse of Commerce Index, "based on real-time diesel fuel consumption data for over the road trucking," jumped significantly in March, erasing what was looking like a very soft patch or even the beginnings of a downturn since mid-2010. The softness earlier this year probably reflected the awful weather back East. This index is consistent with moderate growth of about 3%, which is what most people seem to be expecting these days. I'm seeing more growth downgrades than upgrades, but I remain optimistic that the economy is going to be picking up strength as the year progresses. There is no reason for concern here.

Trade continues to be a bright spot

U.S. trade with the world continues to expand, and that is reason for cheer. Exports have now made a complete recovery from pre-recession highs, growing at double-digit rates in the past few years. If nothing else, this suggests that exports have picked up a lot of the slack that was left by the housing and construction collapse; the U.S. economy is changing dynamically in response to an unexpected and massive shock. Imports are closing in on their prior highs, reflecting a relatively robust recovery in consumer demand in the U.S., which is impressive since employment is still far below prior highs.

A new high for metals

Another unpleasant milestone of sorts: this index of industrial metals price hit a new all-time high last week. The commodity price rally is not over, it would appear, and it is likely being driven by a combination of strong global demand which exceeds the capacity of commodity producers to meet, and accommodative U.S. monetary policy. The latter is playing a more important role these days, as the dollar continues to slide. Importantly, I note that metals prices are still well below their 2007-8 highs when priced in yen, euro, swiss francs, or sterling. Metals prices are relatively strong when compared to their historical ranges, but the bigger news is that the dollar is exceptionally weak. This can only aggravate inflationary pressures in the U.S.