The latest release of the Ceridian-UCLA Pulse of Commerce Index™ (PCI) suggests that the economic activity increased notably in May with the seasonally adjusted index jumping 3.07% as compared to April and increasing 8.99% above the level seen in May 2009. Further, the three month moving average registered another significant year-over-year increase indicating that the May Industrial Production data (released next week) will likely show a similar annual gain. As cited in the release, the PCI is closely correlated to the industrial production series but given the broad nature of the series it’s not surprising to see that it correlates well with other macro data. Looking at the chart below (click for full-screen dynamic version) you can see that while a pretty reasonable correlation exists between the PCI and the S&P/Case-Shiller Composite-10 Home Price Index (CSI), the CSI reached its peak roughly a year before the PCI. Could the latest easing of home prices foretell a general slowing trend in the economy or is the Ceridian index forecasting increasing home prices? We will have to wait some months to find out which trend is leading.