Weekly Updates
Weekly Updates
- Economic data has been surprising markets, and not in a good way. Economic surprise indices compare data releases to consensus forecasts. Surprise indices have been falling recently, signalling economic numbers were weaker than forecast. Is this a signal of economic doom?
- The economic “consensus” is often built on narrow foundations. The Bloomberg survey for German March exports had just 10 forecasts. The French manufacturing production release stood on a very wobbly tripod of three extremely diverse forecasts (or guesses). Markets may not really be surprised by data that most economists cannot be bothered to forecast.
- Data is also revised a lot. Low response rates to government information requests mean low quality initial data releases. Data is revised more often and more significantly in consequence. In the past month, developed economy data has been generally revised stronger (US housing was a notable exception to this). For example, US March retail sales started out mildly disappointing consensus expectations, but were revised to soar far above almost every forecast in the Bloomberg survey.
- Surprise indices focus on the first data release. While the first data release may disappoint, once the numbers are revised the economic reality is likely to be less of a negative shock—and may transform into a positive surprise.
Stay up to date
Stay up to date
