Don't trust the data (do trust the economists)

Posted by: Paul Donovan

22 Nov 2019
  • China announced that its economy was 2.1% larger in 2018 than previously thought. Missing 2.1% of an economy might seem unusual – it is not. Denmark recently revised up the size of its economy for the past three years. Sweden just cut its unemployment rate by almost 1%. The US, on occasion, has revised GDP growth from -0.7% to over +3%.
  • Economic data is not precise. Investors need to stop pretending economic data is precise. Economic data is becoming less and less reliable – a lot of it is survey based, and no one fills in surveys any more (unless they are weird, or want to complain). Structural economic changes mean that calculating the world in a 1930s way is not suitable today.
  • There is a mess of business sentiment data out today. Business sentiment opinion polls have tended to overreact to the real world, and there is a large (negative) sentiment gap with reality. Recently, that gap has been closing with some sentiment measures rallying back to where the real world has been all along.
  • There is little new information on the trade dispute between the US and China. ECB President Lagarde, a lawyer not an economist, is scheduled to speak.

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