The Republic of Rumors

Weekly Updates

Federal Reserve Chair Powell recently suggested that policymakers were driving through a fog, trying to understand the US economy with almost no credible official data. Limited survey evidence and a small number of financial indicators are all that is available.
The European Union is also hampered by, if not a fog, a heavy mist. Official data is produced in Europe, but not that much and not with a great deal of detail. Economists trapped in the eighth circle of the Eurostat website can be readily forgiven for abandoning hope.
This lack of information does not just risk policy error through an inability to discern the economy. In the world of hashtag economics, something has to fill social media and rolling news coverage. In the absence of verifiable data, anecdote and rumor are likely to occupy the void.
Anecdote generally comes with a negative bias. Loss aversion means that bad news is more powerful than good news, and fake news tends to travel farther than faster than the truth. If the economic narrative skews negative because of the lack of reliable information, that may start to feed back into confidence (actual confidence, not survey reports), and thus start to change the economic reality we cannot see.